ESMA Warns of 'No Deal' Brexit Scenario Ahead of Upcoming Deadline

The European Securities and Markets Authority (ESMA ESMA European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of t European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of t Read this Term) has released a statement today warning market participants of a potential hard Brexit Brexit Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades.The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minis Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades.The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minis Read this Term. The European regulator wants to remind entities that there is no guarantee that a transition period will be agreed upon, and therefore, should be making preparations for such an outcome.

In the statement, ESMA stressed that time is running out for companies to become authorized with the appropriate National Competent Authorities (NCAs) and ESMA. Firms wishing to relocate from the United Kingdom to the European Union (EU), and still provide services within the 27 EU countries, must have a fully authorized legal entity located in the region.

Although there is a tentative agreement in place to allow financial institutions a transition period up until December 2020, it is not legally binding until the Brexit deal is finalized and ratified by both sides. Therefore, the regulator suggests entities must be prepared for the worst and secure authorization within the EU before the Brexit deadline of March 30, 2019.

The warning follows several NCAs that have made it clear to entities that unless they receive an application before the end of July, then there is no guarantee they can give authorization before March 29, 2018.

In the statement, ESMA notes an increase in the number of authorization requests it has received. The watchdog also suggests that companies complete the application to a high standard, to ensure it can be analyzed and authorized in the quickest possible manner.

Preparing for the worst

Since the United Kingdom formally announced it was leaving the EU on March 29, 2017, many regulators in the finance industry throughout the region have been warning companies and institutions to be prepared for a “no deal” worst case scenario.

Earlier this year in June, the European Banking Authority released a similar warning to banks. The warning said that banks could not rely on a transitional agreement past March 2019.