Royal Decree-Act 5/2019 covering Spain’s Brexit contingency measures, was published on the Spanish Gazette on Friday March 2 (the “Royal Decree-Act”).

This Royal Decree-Act will only be applicable if the United Kingdom leaves the European Union without having reached an agreement. One of the purposes of the Spanish government, through this Royal Decree-Act, is to guide the economic operators that could be affected by the withdrawal of the United Kingdom from the European Union without having reached an agreement. One of the chapters of this Royal Decree-Act, entitled “Economic activities”, includes a specific section called “Financial services”.

We summarize the contingency measures applicable to the financial sector herein:

Continuity of financial services agreements

Those financial agreements signed before the withdrawal of the United Kingdom from the European Union, by which an entity established in the United Kingdom or Gibraltar renders banking, securities, insurance or other financial services in Spain, will remain in force.

Authorization regime

Without prejudice to the validity of the aforementioned agreements, the applicable regime established in the sectoral legislation for third countries will apply to those entities from the date of the withdrawal. The entities will need a new authorization in the following cases:

a) If the entities would like to add or renew any modification that would involve the provision of new financial services in Spain, or that would affect the parties’ essential obligations.

b) If the entities would like to carry out activities related to the management of any agreement that would require an authorization under Spanish law.

c) If the entities would like to enter into new agreements.

Provisional authorization regime

The authorization or registration of the financial entities indicated above will temporarily maintain their validity for a period of 9 months once the withdrawal of the United Kingdom takes place. This has the aim at:

a) Allowing entities to carry out an orderly termination or assignment to another duly authorized entity of their agreements, or

b) Requesting the necessary authorization in Spain. In this case, the provisional validity will be effective from the date on which the entity requests said authorization or, in the case the request was done previously to the entry into force of the Royal Decree-Act, its validity will start once this happens.

Supervisors

The Bank of Spain, the National Securities Market Commission and the General Directorate of Insurance and Pension Funds may request from the British entities that operate in Spain, all the documents and information as they deem fit, as well as to carry out any necessary actions.

In addition, these authorities will appropriately act to protect the interests of the consumers of financial services, as well as protecting legal certainty.

The European Central Bank, in collaboration with national supervisors, is preparing a document with all the frequently asked questions that will include the main issues of interest. This list of questions will be periodically updated.