Royal Decree-Law 38/2020, of December 29, sets out the measures to adapt the UK to the status of a third country as provided for in the ´Brexit` Withdrawal Agreement. The decree includes a specific section regarding financial services which is summarised below.
Contract continuity
Contracts entered into before January 1, 2021 with banks and insurance entities domiciled in the United Kingdom and which provide financial services in Spain will remain in force.
New authorisations
As of January 1, 2021, the UK is subject to the legislation for third countries with entities providing financial services in Spain, so new authorizations must be obtained in the following cases:
a) For the renewal of contracts signed prior to January 1, 2021.
b) For the introduction of modifications in contracts signed prior to January 1, 2021, which involve the provision of new services in Spain or which affect essential obligations of the parties.
c) In those cases in which the activities related to management of contracts require authorization.
d) To enter into new contracts.
Extended validity
Authorizations initially granted by the competent British authority to the banking and other financial entities may have their validity extended until June 30, 2021. This period of extended validity will ensure the orderly termination or assignment of the contracts signed before January 1, 2021 to entities duly authorized to provide financial services in Spain.
In the case of insurance companies, the period of validity may be extended until December 31, 2022 to manage existing portfolios of insurance contracts provided that the entity insurer provides a contingency plan expressly authorized by the General Directorate of Insurance and Pension Funds.
Fines and sanctions
The Bank of Spain, the National Securities Market Commission and the General Directorate of Insurance and Pension Funds, may request from UK banking, securities, and insurance entities any documentation to carry out whatever actions are necessary.
If the request is not satisfactorily met within the granted period, the Spanish supervisory authorities may also annul the provisional validity in relation to the UK corresponding entity. In this case, the affected entity will be informed that it is carrying out a reserved activity without authorization and will be liable to fines or sanctions by the supervisory authorities.
The authorities will adopt, within their respective remits, all the pertinent measures to guarantee legal certainty and to safeguard the interests of the users of the financial services that could be affected by the United Kingdom’s exit from the European Union.
