Brexit: The Italian legal framework governing UK financial firms operating in Italy after the end of the transition period (December 31, 2020) – Finance and Banking

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Brexit: The Italian legal framework for UK financial firms operating in Italy after the end of the transition period (December 31, 2020)

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Banks

As of January 1, 2021, UK banks will be considered non-EU banks and regulations will apply.

Accordingly, UK banks are authorized by the Bank of Italy to operate in Italy through a branch or across borders.

In addition, UK banks can also be authorized to provide investment services (Bank of Italy has consulted Consob):

  • to retail and professional customers on request only if a branch has been established;
  • towards legitimate counterparties and per se professional customers, also across borders.

If UK banks currently operating in Italy are not approved as non-EU banks during the transition period, they will not be allowed to continue operating.

Over the past few months, the Bank of Italy has recommended UK banks:

  1. carry out the activities required for approval as non-EU banks (submitting the relevant application) in a timely manner in order to avoid disrupting business continuity
  2. Properly inform existing Italian customers of the implications of Brexit for their relationships.
Investment firms

From January 1, 2021, the rules of non-EU investment firms will apply.

Accordingly, UK investment firms are authorized by Consob (after consulting the Bank of Italy) to provide investment services in Italy:

  • to retail and professional customers on request only if a branch has been established;
  • towards legitimate counterparties and per se professional customers, also across borders.

If UK companies currently operating in Italy are not authorized as non-EU investment firms under the above rules, they will no longer be allowed to continue their business after the end of the transition period.

Both Consob and Esma recommended UK investment firms to advise their clients on the consequences of Brexit.

E-money institutions

As of January 1, 2021, UK e-money institutions are considered non-EU companies and are therefore entitled to provide services in Italy through a branch.

Cross-border provision of services is not permitted.

Payment institutions

As of January 1, 2021, UK payment institutions will no longer be allowed to operate in Italy.

The Bank of Italy made it clear that these companies could transfer their business to Italian institutions (or passported EU institutions in Italy) during the transition period in order to ensure the continuity of activities with clients.

Asset management companies

As of January 1, 2021, UK wealth management companies will no longer be allowed to operate in Italy.

The Bank of Italy made it clear that asset management companies could transfer their business to Italian companies (or passported EU companies in Italy) during the transition period in order to ensure continuity of activities with clients.

Under the Memorandum of Understanding signed between Esma and FCA, the transfer of functions related to UCITS and AIFs (including investment management functions) from EU countries (including Italy) to UK-based management companies will be allowed even after the end of the transition period.

Insurance companies and insurance intermediaries

As of January 1, 2021, UK insurance companies and intermediaries will no longer be allowed to operate in Italy.

UK insurance companies and intermediaries are approved by IVASS as non-EU companies.

IVASS has made it clear that the agreements that have already been signed with customers will remain in effect.

Pension funds

COVIP clarified that the transfer of administrative functions of Italian pension funds to UK management companies will be allowed even after the end of the transition period under the normal rules for delegating administrative functions to companies from third countries.

The content of this article is intended to provide general guidance on the subject. A professional should be consulted about your particular circumstances.

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