As it was decided on Thursday 23rd June by 52% of voters, UK is about to leave the European Union. Unfortunately, this decision will have profound impacts on implications for the UK’s financial services industry. There are several consequences that might cause huge inconveniences. Once of them is a potential loss of passporting rights for UK banks and financial institutions.

Worst case scenario – UK banks and Institutions might me be treated as “third country” institutions under EU law.

Due to the fact, that UK is most probably not going to join the EEA or obtain a bilateral arrangement for access for certain sectors, the loss of passporting rights for UK banks and financial institutions seems highly probable.

“While UK banks and financial institutions may be able to access the single market in financial services, many questions remain around if and when agreements between the EU and the UK will be put in place and whether such agreements will form part of exit negotiations.”


Currently, UK banks operate across the EEA on a freedom of establishment basis and freedom of services. As third country institutions, the most evident result of Brexit will be the loss of these passporting rights; with UK banks no longer allowed to provide banking services on a cross-border basis which might cause significant restrictions on the ability of UK banks to directly engage with EEA customers, potentially limiting them to providing services on a reverse solicitation basis.

On one hand, UK banks may be able to access the EEA market on a country-by-country basis through the establishment of local branches. On the other hand, UK banks could establish subsidiaries in the EEA that could passport their services into other Member States, although even this approach is not without questions. Let us help you to find a solution.

Payment and e-Money Institutions and Fintech Companies

Neither the e-money Directive nor the Payment Services Directive provides for specific access rights for third country institutions on a branch basis or otherwise. The rules relating to access for third country branches of payment and e-money institutions may therefore vary significantly between Member States. Although the E-Money Directive provides for agreements with one or more third countries it is not clear if or when such an arrangement could be put in place between the EU and the UK.

Investment firms

Regarding payment and e-money institutions, the access regime for third country investment firms is not currently harmonised. Due to this fact, it will be necessary for UK investment firms to examine establishing a branch as a non-EU investment firm in each Member State.  Let us help you to find a solution.

Furthermore, the current MiFID regime hasn’t harmonized provisions on access for branches of third country investment firms, Directive 2014/65/EU (“MiFID II”), that is going to be implemented across the EEA from 3rd January 2018, seeks to harmonize the requirements for approving branches of third country investment firms. Such branches would still lack one of the fundamental advantages of EU and EEA branches, for example the ability to provide services in other Member States.

For UK retail investment firms trying to operate in the EU, it will be necessary to go through the third country branch approval process in every Member State which the institution would like to operate in. “The establishment of a subsidiary may therefore remain a more attractive option following the implementation of MiFID II for retail firms. For non-retail firms it would be possible to register with ESMA under MiFIR and provide services in the Member States.”

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