"In the unlikely event it is needed, and therefore intends to provide the financial services regulators with a general power to phase in post-exit requirements"
HM Treasury has told financial services firms that they don't need to take any action in the event that no deal is reached with the EU over Brexit.
In a paper released yesterday, the Treasury says it does "not anticipate [a no-deal scenario] arising", despite international trade secretary Liam Fox recently stating that a no-deal Brexit is now the most likely outcome.
The Treasury said, however, that it will "prepare for this unlikely eventuality... to ensure that the UK continues to have a functioning financial services regulatory regime in all scenarios".
The paper confirmed that the government will legislate to give regulators powers to phase in any transitional measures, such as "onshoring" financial services legislation.
This, it said, means that firms "do not need to prepare now to implement onshoring changes in the event no deal is reached with the EU" and should continue to plan on the assumption that an implementation period will be in place from 29 March 2019.
However, the Treasury did highlight some difficulties that would arise if the UK leaves the EU without a deal, such as the UK needing to default to treating EU Member States largely as it does other third countries.
In a no-deal scenario, the Treasury confirmed that it would introduce the Temporary Permissions Regime to deal with the loss of passporting rights, allowing EEA firms to continue operating in the UK for a limited period.
HM Treasury also intends to introduce further specific transitional regimes for entities operating cross-border and outside of the passporting framework.
The paper states: "HM Treasury is aware that firms would need time to adjust to this changed regulatory regime in the unlikely event it is needed, and therefore intends to provide the financial services regulators with a general power to phase in post-exit requirements, allowing flexibility for firms to transition to a fully domestic UK regulatory framework."