The law decree lays down a temporary regime for regulated firms in a no-deal Brexit scenario.

On 20 March 2019, the Italian Council of Ministers approved a law decree laying down urgent measures to ensure financial stability and market integrity in the event of a no-deal Brexit. In particular, the decree lays down a temporary regime — granting a grace period of six months (Short Grace Period) or eighteen months (Long Grace Period) starting from the no-deal withdrawal date (Withdrawal Date) — for UK-regulated firms operating in Italy and Italian-regulated firms operating in the UK that will lose their European passport in a no-deal scenario.

The decree (Law Decree No. 22 of 25 March 2019) was published on 25 March 2019 in the Official Gazette and is effective as from 26 March 2019.

Key takeaways for UK-regulated entities include:

• UK banks can continue to provide banking services for the Long Grace Period, provided that they file a notice to the competent authority (Bank of Italy) at least three business days prior to the Withdrawal Date (Prior Notice) and that with respect to deposit-taking activities carried out on a cross-border basis before such a Withdrawal Date, they will only be entitled to carry on existing relationships without entering into new agreements with Italian clients.
• UK banks and investment firms operating in Italy through a branch can continue to provide investment services for the Long Grace Period, provided that they file the Prior Notice with the competent authority (Bank of Italy or CONSOB).
• UK banks and investment firms operating in Italy on a cross-border basis can continue to provide investment services for the Long Grace Period provided that they file the Prior Notice with the competent authority (Bank of Italy or CONSOB) and that they provide such services only to MiFID-eligible counterparties, per se public and professional clients, and — for the sole purpose of managing the life cycle of over-the-counter derivatives outstanding on the Withdrawal Date — to any of the 20 Italian regions, the independent provinces of Trento and Bolzano, and local entities.
• UK e-money institutions operating in Italy through a branch can continue to carry out such operations for the Long Grace Period provided that they file the Prior Notice with the competent authority (Bank of Italy); UK e-money institutions operating on a cross-border basis shall cease operations in Italy by the end of the Short Grace Period.
• UK payment institutions; asset management companies; investment funds and other collective undertakings; banks; investment firms providing services in Italy on a cross-border basis to retail clients; or firms that have not filed the relevant Prior Notices with the competent authorities as set out above shall cease operations in Italy by the end of the Short Grace Period, and during this transitional period will only be permitted to serve and manage the existing contracts.
• UK insurance companies operating in Italy can continue activities during the Long Grace Period limited to the maintenance of the existing insurance contracts and coverages without entering into any new or renewal of existing contracts; UK insurance and re-insurance distributors shall cease operations in Italy by the end of the Short Grace Period.
• UK-regulated firms operating trading venues in Italy can continue to manage such venues and grant access to providers established in Italy on the Withdrawal Date provided that within such a date they file the application with the competent authority (Bank of Italy or CONSOB) to continue the operations in compliance with the applicable European provisions.

Key takeaways for Italian-regulated entities include:

• Italian-regulated entities (including banks, investment firms, payment and e-money institutions, SGRs, SICAV, SICAF, managers of EuVECA, EuSEF and ELTIF funds, and financial intermediaries under Article 106 of the Italian Banking Act) operating in the UK can continue their activities during the Long Grace Period, provided that they file the Prior Notice with the competent authority (Bank of Italy or CONSOB) and comply with the applicable UK provisions.
• Italian-regulated firms operating trading venues in the UK can continue to manage such venues and grant access to providers established in the UK on the Withdrawal Date provided that within such a date they file the application with the competent authority (Bank of Italy or CONSOB) to continue the operations in compliance with the applicable UK and European provisions.