Brexit: the Italian legal framework on UK financial entities operating in Italy after the end of the transition period (December 31st, 2020)

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Banks

From January 1st, 2021, UK banks will qualify as non-EU banks and relative provisions will apply.

Accordingly, UK banks shall be authorized by the Bank of Italy to operate in Italy, through a branch or on a cross-border basis.

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

  • towards retail and professional on request clients, only if a branch is established;
  • towards eligible counterparties and per se professional clients, also on a cross border basis.

If not authorized as non-EU Banks within the end of the transition period, UK banks currently operating in Italy would not be allowed to continue their business.

In the last months the Bank of Italy recommended UK banks to:

  1. perform the activities necessary to be authorized as non-EU banks (submission of the relevant application) in time to avoid a break in business continuity;
  2. duly inform existing Italian clients on the consequences of Brexit on their relationships.

Investment firms

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

Accordingly, UK investment firms shall be authorized by Consob (having consulted Bank of Italy) to perform investment services in Italy:

  • towards retail and professional on request clients, only if a branch is established;
  • towards eligible counterparties and per se professional clients, also on a cross border basis.

If not authorized as non-EU investment firms according to the mentioned rules, UK firms currently operating in Italy would not 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

From January 1st, 2021, UK e-money institutions will qualify as non-EU firms and therefore they shall be authorized to provide services in Italy through a branch.

The provision of services on a cross-border basis won’t be allowed.

Payment institutions

From January 1st, 2021, UK payment institutions won’t be allowed to operate in Italy.

Bank of Italy clarified that such firms may, within the end of the transition period, transfer their business to Italian institutions (or EU institutions passported in Italy) to guarantee continuity of activities with clients.

Asset management companies

From January 1st, 2021, UK assets management companies won’t be allowed to operate in Italy.

Bank of Italy clarified that assets management companies may, within the end of the transition period, transfer their business to Italian entities (or EU entities passported in Italy) to guarantee continuity of activities with clients.

According to the memorandum of understanding signed between Esma and FCA, the delegation of functions related to UCITSs and AIFs (included investment management functions) from EU countries (included Italy) to management companies resident in UK will be allowed also after the end of the transition period.

Insurance companies and insurance intermediaries

From January 1st, 2021, UK insurance companies and insurance intermediaries won’t be allowed to operate in Italy.

UK insurance companies and insurance intermediaries shall be authorized by IVASS as non-EU entities.

IVASS has clarified that the agreements with clients already signed will remain effective.

Pension funds

COVIP clarified that the delegation of management functions of Italian pension funds to UK management companies will be allowed also after the end of the transition period, according to the ordinary rules on the delegation of management functions to third countries entities.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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