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LONDON (Reuters) – Regulators in Britain and the European Union said they have dusted off their no-deal Brexit agreements to avoid disruption in cross-border asset management.
Britain left the EU in January, but unfettered access to the European market has continued under a transition agreement that ends in December.
Negotiations of a new UK-EU trade pact have stumbled, and Britain’s requests for direct financial market access are being separately by Brussels.
The European Securities and Markets Authority (ESMA) and Britain’s Financial Conduct Authority (FCA) said on Friday that memoranda of understanding (MOUs) drawn up in February 2019 in case Britain left the bloc without a transition deal “remain appropriate”.
They will now come into effect after the end of December, when the transition period expires, ESMA and the FCA said in separate statements.
One MoU allows for EU and UK regulators to swap information, a legal requirement for the continuation of “delegation”, or funds registered in EU countries like Ireland and Luxembourg outsourcing stock-picking to managers in London or elsewhere outside the bloc.
Delegation avoids the need to move portfolio managers to where the funds are domiciled.
“This was a rare bit of good news,” a senior official at a UK-based asset management company said.
In 2019, Goldman Sachs (N:GS) and BlackRock (N:BLK) had considered temporarily moving some UK-based asset managers to New York before the original MoUs were agreed, since the United States already had such cooperation agreements with Brussels.
The other MoUs cover credit-rating agencies, allowing regulators to swap information on Moody’s (NYSE:MCO), S&P and Fitch whose analysts in London rate companies in the EU. Trade repositories are also covered.
Brussels is assessing whether to grant direct financial market access, known as equivalence, to a range of financial services from January.
London and Brussels missed a deadline at the end of June for completing assessments, but Britain said last week it had now returned all EU questionnaires.
The bloc has said it will allow EU investors to continue using derivatives clearing houses in Britain temporarily after December.
