What will the Great Repeal Bill mean for financial services?

15 May 2017

By Laura Cox 

The Government provided some insight on what to expect when we finally get sight of the Great Repeal Bill 2017 (GRB) in its white paper on ‘Legislating for the United Kingdom’s withdrawal from the European Union’ issued on 30 March 2017.

Among other purposes, the GRB will be the mechanism used for transposing European Union (EU) law (as at the exit date) into UK law using statutory instruments wherever possible, rather than enacting new or amending existing primary UK legislation.

Many details are still unclear, but what is clear is that the task ahead is enormous, unparalleled in our legislative history, and fraught with potential for error. You can find further detail on the process in our earlier blog.

So what will this mean for financial services legislation? Since the 2008 financial crisis, the EU has issued an avalanche of financial services laws and regulations that seek to address the causes of the financial crisis. Both the EU and UK financial services regimes are complex, and heavily intertwined. Also, the EU legislative and regulatory framework that the UK would have to adopt has multiple layers: 170511-121646-TN-OS_v1_Blog 2The EU has introduced over 550 financial services measures since 2008:

 Level 1
 Directives or  Regulations

 Level 2  Implementing  Technical  Standards  (ITS)

 Level 2
 Regulatory  Technical  Standards  (RTS)

 Level 2
 Delegated  Acts
 Level 2  Implementing  Acts  Level 2
 Regulatory  Procedure with  Scrutiny
 34  105  175  103  71








Much of financial services regulation in the UK stems from the Financial Services and Markets Act 2000 (FSMA) and the underlying Financial Services and Markets Act (Regulated Activities) Order 2001. FSMA consists of both transposed EU law and domestic measures. It is the mechanism whereby EU financial services directives have been brought into UK law by secondary legislation in the form of statutory instruments (SI) issued by HM Treasury (HMT). To date, 236 SIs have been introduced under FSMA. Parliament will have to amend FSMA and possibly other primary financial services legislation to reflect the transposition of EU law into UK law.

Currently, EU regulations apply directly in EU Member States, and so do not need to be adopted through local legislative measures. As a result, all of the EU law that has been issued in the form of EU regulations isn’t currently set out in UK law, although some aspects of the financial services regulations have been reflected in the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) Handbooks. Bringing this body of EU law into UK law will be one of the most challenging legislative tasks to achieve Brexit. EU regulations cannot just be copied and pasted directly into UK law via statutory instruments or handbook changes as they are drafted specifically for the EU single market, so use EU-specific terms. They also set the obligations and tasks of certain EU bodies in relation to implementing and enforcing these regulatory requirements. For example, European Securities and Markets Authority (ESMA) currently regulates Credit Rating Agencies and Trade Repositories, so a UK body will need to take over those responsibilities. There remain question marks over the future regulatory regime for central counterparties (CCPs) that will need to be considered too.  

Looking at the impact of transposing a couple of pieces of EU legislation illustrates the complexity and scale of the task ahead.

170511-121646-TN-OS_v1_Blog 1
Please click the image to enlarge

To add to the pressure, the Government intends to run the Article 50 negotiation process and amendments to UK legislation in parallel. But a last minute dash to the negotiation finish line should not be at the expense of gaps in coverage. It’s therefore crucial for firms wishing to influence many of the upcoming decisions to engage with this process as soon as possible.

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