As of 1 February 2020, the United Kingdom ceased to be a member of the European Union. The process had begun on 29 March 2017, with the UK’s notification of its intention to withdraw from the Union (Brexit). To ensure the United Kingdom’s orderly exit from the EU, a Withdrawal Agreement was subsequently negotiated: concluded on 17 October 2019, it was ratified on 30 January 2020. The agreement provided for a transition period up to 31 December 2020, during which time EU law continued to apply to the United Kingdom, including as regards access to financial services. At the end of this period, European law ceased to apply in the UK, now considered a third country to all intents and purposes.
On 1 January 2021, the EU-UK Trade and Cooperation Agreement governing bilateral relations, which was negotiated in the interim, entered into effect. In the area of financial services, the agreement provides for the drawing up of a Memorandum of Understanding on regulatory cooperation, but the degree of reciprocal access to the markets is considerably lower than previously permitted within the EU under the principle of mutual recognition. In fact, the relevant European and national laws now regulate access to the market. In particular, in Italy the provisions of the Consolidated Laws on Banking and Finance apply to authorizations for banking and financial intermediaries and payment service providers of third countries (see the section BUSINESS IN ITALY). To safeguard financial stability, the European Commission has also adopted two equivalence decisions for the central counterparties and central securities depositories of the United Kingdom, valid for 18 and 6 months respectively.
The European and Italian institutions and authorities have acted to ensure an adequate degree of preparedness for the United Kingdom’s departure from the Union. In Italy, Decree Law 183/2020 (in Italian only) contains transitional measures designed to guarantee the continued provision of services and safeguards for customers of British intermediaries operating in Italy that have applied for the relevant authorizations.
Documents by the Bank of Italy
The United Kingdom’s exit from the European Union, completed on 31 December 2020 with the expiry of the transition period envisaged under the Withdrawal Agreement, has significant implications for the provision of services to European customers by UK financial intermediaries. In view of this, the Italian government has introduced measures to safeguard the customers of UK intermediaries operating in Italy (see Article 22 of Decree Law 183/2020 – only in Italian). In particular, there are measures ensuring continuity in the provision of services by intermediaries that had already applied for a new authorization to operate in Italy when the Decree Law entered into force, and the orderly management of contractual relations in cases where intermediaries are to cease operations.
The Bank of Italy has issued two communications where the content of the above-mentioned measures is explained, highlighting the aspects of interest for UK intermediaries operating in Italy and for their customers, respectively.
- Communication to UK intermediaries operating in Italy on the provisions regarding Brexit contained in Article 22 of Decree Law 183/2020 (2 January 2021)
- Communication to customers of UK intermediaries operating in Italy (only in Italian; 2 January 2021)
The Bank of Italy has published a communication recalling the effects of the end of the transition period provided for in the Withdrawal Agreement and asking UK banking and financial intermediaries operating in Italy to provide customers with the appropriate information on the most sensitive aspects: (a) procedures and contact details for assistance, reports or complaints; (b) an alternative dispute resolution system; and (c) the applicable deposit protection regime. UK intermediaries are also invited to complete, in an orderly manner, their Brexit-related plans, to limit the adverse effects of interrupting services for their customers and, in any case, to allow them to exercise their rights as regards the continuation, transfer or termination of existing contracts.
- Communication addressed to UK intermediaries ahead of the end of the transition period (15 December 2020).
To manage the legal effects of Brexit in terms of the finality of transfer orders carried out by Italian intermediaries in payment and settlement systems located in the United Kingdom, the Bank of Italy has adopted, in the implementation of Article 10, paragraph 5, of Legislative Decree 210/2001 (implementing the 'Settlement Finality Directive' 98/26 /EC), two measures, which are aimed at preserving the current conditions for the participation of Italian institutions in payment and securities settlement systems governed by English law.
- Measures pursuant to Article 10(5), of Legislative Decree 210/2001, and subsequent amendments (10 December 2020)
The Bank of Italy has published a Communication which invites the customers of UK financial intermediaries operating in Italy to verify that they have received adequate information on the consequences of Brexit for existing contractual relations. If this is not the case, it is suggested that customers contact their intermediary as soon as possible to obtain indications about the possibility of doing business in the future.
- Important information for the clients of UK-based financial institutions operating in Italy (9 November 2020).
The Bank of Italy has published a Communication which summarises the relevant features of the Italian third-country licensing regime, which will apply to all UK intermediaries once the transition period has ended, and urges all UK intermediaries operating in Italy to duly inform their clients about the actions they have taken in relation to Brexit and its consequences for existing contractual relationships:
- Communication containing instructions for UK intermediaries pursuant to the Withdrawal Agreement (29 April 2020).
In August 2019, the Bank of Italy signed a Memorandum of Understanding with the United Kingdom's supervisory authorities that will ensure an adequate level of cooperation and an exchange of information between the authorities when, at the end of the transition period, EU legislation will no longer apply to the United Kingdom.
- Memorandum of Understanding between the Bank of Italy, the Bank of England/Prudential Regulatory Authority and the Financial Conduct Authority.
The Bank of Italy has called on British financial institutions operating in Italy to inform their Italian clients about the actions they have taken in relation to Brexit and its consequences for existing contractual relations. These institutions should continue to keep their Italian clients adequately informed during the transition period.
- Information to be provided to Italian customers by UK-based financial institutions operating in Italy (19 February 2019).
Communications on a no-deal Brexit, no longer relevant or applicable, are available here.