On 8 December 2020, the European Banking Authority informed customers of UK financial institutions that, owing to Brexit, EU law will cease being applicable in the UK as of 1 January 2021. From that date onwards, UK financial institutions not holding a valid authorisation from the supervisory authorities in the EU will lose the right to provide financial services in the EU.

Preparedness of financial institutions

In order to continue to provide financial services in the EU, UK financial institutions will need to ensure that they offer these services through entities that are duly authorised in the EU. Based on the assessment of the supervisory authorities in the EU, most of the UK financial institutions that are actively planning to continue offering their services in the EU have obtained adequate authorisations for their EU-based activities.

In the event the UK financial institutions have chosen to cease their activities within the EU, they are required to complete the off-boarding of the affected customers by the end of the transition period and without causing detriment to those customers.

Changes in cross-border payments between the EU and UK

After the end of the transition period, EU-based payment service providers will need to provide more information regarding the payer for cross-border payments and direct debits from the EU to the UK, compared to intra-EU transfers, which is how payments to the UK have so far been treated.

Access to bank accounts in UK and protection of depositors

Under EU law, after the end of the transition period, consumers in the EU may maintain their existing bank accounts held with UK financial institutions, subject to the relevant UK legal requirements. However, consumers need to consider the following:

• If the consumer’s bank account is held with a UK financial institution authorised in the UK, the deposit protection rules applicable in the UK will apply, and these may be different to those applicable to bank accounts held in the EU.
• If the bank account is held with an EU-based branch of a UK financial institution, it will no longer be covered by the UK deposit guarantee scheme (as explained by the UK authorities), consumers are advised to check with their financial institution (branch) or national supervisory authorities in their Member State whether such deposits will be protected by the deposit protection scheme in the relevant Member State.

Further, based on the currently available information, the consumer’s bank account will be covered by the UK deposit scheme in the event the bank account is held with a UK-based branch of an EU-authorised institution, however, this is subject to change after the expiration of the transition period.

Consumers to seek more information from their financial institutions

The EBA has been calling on all financial institutions affected by Brexit and in particular UK financial institutions offering financial services to consumers in the EU, to adequately and timely inform consumers

regarding the availability and continuity of the services they currently provide, including whether institutions plan to cease offering services to consumers in the EU.

Consumers are also encouraged to consult the websites of the EBA, the EU Commission (eg European Commission Notice to stakeholders) and national supervisory authorities for communications and guidance about the UK withdrawal from the EU and its impact on the provision of financial services in the specific Member States.

EBA’s press release can be found here.