The Chancellor of the Exchequer, Rishi Sunak, this week outlined in a statement that the UK will “exercise its discretion” when implementing EU regulations that will not have come into force by the time the Brexit transition period ends on 31 December.
The statement says that the UK will not incorporate into law the fourth phase of reporting obligations of SFTR, which applies to Non-Financial Counterparties (NFCs) and is due to apply in the EU from January 2021.
In response, our Senior Regulatory Reporting Specialist, Jonathan Lee, said:
“We welcome the Chancellor starting to provide some clarity on the rules which will govern the UK’s financial services sector following our departure from the EU. Firms will welcome changes to regulation that will reduce the compliance burden whilst remaining equivalent to the ESMA regulations.
“The Chancellor’s announcement indicates that the first sets of rules to diverge will be in the application of SFTR for non-financial counterparties (where only single-sided financial counterparty reporting will be required) and in the UK’s refusal to adopt buy-in rules under CSDR. This divergence might be an issue for multinational institutions operating in the UK and EU where they will increasingly need to manage two distinct sets of reporting rules and have systems, controls and personnel able to ensure ongoing compliance with both regimes.
“However, there appears to be plenty of scope to additionally tailor the EMIR and MiFIR reporting regimes to the benefit of the UK firms without losing equivalence.”
Read our Brexit White Paper: Warning: Brexit can damage your MiFIR Transaction Reporting and EMIR Trade Reporting.