Transition period for Brexit and the FFSA’s remit
The EU Parliament and the United Kingdom have agreed on the withdrawal of the UK from the European Union (Brexit) and adopted a withdrawal agreement. The withdrawal agreement between the parties will enter into force on 1 February 2020, and it provides on a transition period lasting until the end of 2020.
The Financial Stability Authority (FFSA) is responsible for deposit guarantee in Finland, and it is part of the EU’s Single Resolution Mechanism. The FFSA has monitored the withdrawal of the UK from the EU closely within the scope of its remit in cooperation with other authorities and banks.
The withdrawal agreement dismantles the cooperation based on the UK’s membership in the EU in a controlled manner. In accordance with the withdrawal agreement, EU regulation related to crisis resolution and deposit guarantee will apply to relations between EU countries and the UK during the transition period as in the past. After the transition period, the UK will become a so-called third country, and therefore the EU and UK will have to negotiate and implement their new relations in matters pertaining to resolution and deposit guarantee separately during the transition period.
Banks are advised to continue the necessary preparations for the eventuality that, after the transition period, MREL-eligible liabilities issued under UK law may no longer be eligible to cover MREL in the absence of a contractual clause acknowledging the implementation of a haircut to debt principal and an affirming legal opinion.
UK banks do not have branches in Finland, and therefore Brexit has no direct impact on the deposit guarantee for deposits in Finland. Nordea is the only Finnish bank with a branch in the UK, and it will remain covered by Finnish deposit guarantee. The UK requires branches to join the British deposit guarantee scheme. The validity of deposit guarantee does not require any actions by depositors.