The withdrawal agreement between the UK and the EU27 ensured an orderly withdrawal supported by a transition period to facilitate the process and allow more time for citizens, consumers, and businesses to prepare and adapt. Throughout this transition period, the UK remained part of the EU’s single market and customs union without being represented in the EU institutions.
The transition period will now end on 31 December 2020 and following that date, Union law will no longer apply in the UK.
Against this background, the MFSA has been engaging with stakeholders to ensure that all necessary actions for readiness are taken by the end of 2020. The MFSA has been following the contingency plans of its licensed entities and monitoring their readiness, taking into account the guidance and public communications issued by the European Commission and the European authorities.
In its latest circular of 18 November 2020, the MFSA set out its expectations as to what licence holders (insurance, investments, and credit and financial institutions) need to do between now and the end of the year. A number of aspects were specifically highlighted.
Maltese licence holders providing services in the UK were encouraged to finalise and implement their contingency plans by 31 December 2020 and be prepared for all possible scenarios, including the possibility that no equivalence decision is taken in their particular sector of services.
Licence holders should communicate such contingency plans to their clients and, in particular, the changes that might impact the clients directly. Furthermore, the MFSA should continue to be provided with timely and accurate information about the potential impact of Brexit on the services provided by the respective licensed entity.
The MFSA also reminded its licence holders that should they wish to continue servicing UK clients, they should reach out to the UK authorities in a timely manner and seek appropriate authorisation. The MFSA will be accepting outbound passporting notifications to the UK until 10 December 2020.
UK entities currently passporting in Malta were informed that the MFSA does not intend to grant additional temporary permission for the provision of services to Maltese clients and therefore they should ensure they have obtained the necessary authorisation from an EU competent authority and have effectively established themselves in an EU Member State before the end of the transition period.
Any UK entities who intend to continue operating in Malta post-Brexit are required to inform the MFSA of such intention and seek approval.
Furthermore, local clients (customers, policyholders, investors) were made aware of the need to ensure that any UK entity providing them with a licensable service, is authorised to do so.
At the time of writing, the EU and the UK are currently negotiating an agreement to seal a future partnership deal that needs to be in place from 1 January 2021. With the outcome of these political negotiations still unclear at the time of writing, the impact of Brexit in 2021 cannot be precisely formulated.
Nevertheless, it is not excluded that there could be some market volatility and disruption to financial services could arise from the UK’s exit from the single market at the end of the transition period. The MFSA continues its engagement with the industry in order to mitigate the risks posed to the economy, consumers, the financial system, and the regulatory environment.