Almost 600 UK-based financial institutions lost their licence to operate on Portuguese territory on January 1. However, the Bank of Portugal is giving a transitional period.
The Brexit agreement reached on Christmas Eve defined UK-EU relations on topics such as fair competition, road network or fisheries starting in 2021. However, it left a void regarding financial services, on which the terms of the agreement have yet to be closed. The Bank of Portugal (BoP) has therefore suspended licences for credit institutions, investment companies and management entities based in the United Kingdom and operating or providing services in Portugal. They now have one year to resolve the situation or leave the country.
Since January 1, 2021, credit institutions, investment firms and management entities based in the United Kingdom that carry out activities or provide services to investors in Portugal who wish to make new contracts or conduct new operations relating to those activities in the country “have become dependent on authorisation from the Bank of Portugal,” as is the case with entities from other third countries outside the European Union, explained the bank supervisor to ECO.
The Bank of Portugal had already announced that UK-based financial entities allowed to operate in Portugal under the Community passport regime would lose that authorization because of Brexit. However, the national supervisor now clarifies that there will be a transitional period of one year. By the end of 2021, they have to close deals with customers or request the necessary authorisations to operate in Portugal.
The intention is to prevent the lack of an appropriate legal framework to replace the one currently in force following the UK’s withdrawal from the European single market. Thus, credit institutions, payment institutions and electronic money institutions based in the United Kingdom will be able to “perform the necessary acts for the implementation and execution of contracts relating to those services or activities” which have been concluded by the end of the transitional period provided for in the exit agreement.
There are currently almost 600 UK-based entities authorised to operate on Portuguese territory under the Community passport regime. Almost all of these institutions (credit institutions, electronic money institutions and payment institutions) operate in Portugal under the freedom to provide services and have no physical presence on Portuguese territory.