In December, following intensive negotiations, the EU and the UK succeeded in concluding a free trade agreement that will govern their future relationship in many areas of economic activity.

The agreement came into force on a provisional basis on 1 January 2021. The provisional application of the agreement, which the European Council has approved, is to apply until, but not beyond, 28 February 2021. The European Parliament will need to reach a decision on the final application of the agreement by that date.

However, the provisions of this agreement will apply to financial services only to a limited extent, as these will remain subject to EU or UK supervisory law unless other regulations are in place – for example based on equivalence decisions of the European Commission (see expert article on the BaFin website dated 16 November 2020).

From a supervisory perspective, the United Kingdom is now considered a third country in relation to the EU following the expiry of the transition period at the end of December 2020. As of January 2021, financial services providers domiciled in the UK will no longer be able to use the European passport, which had previously granted them access to the entire European Economic Area (EEA).

Unless there are regulations under European or national supervisory law that explicitly set out other terms, companies domiciled in the UK that intended to continue providing financial services in the EEA on a cross border basis without interruption were required to set up a branch in an EEA state by the end of the transition period.

It is still possible to submit applications for authorisation. In Germany, the conditions for the authorisation requirement and the authorisation procedure are governed by the German Banking Act (Kreditwesengesetz – KWG), the German Insurance Supervision Act (Versicherungsaufsichtsgesetz – VAG), the German Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz – ZAG) and the German Investment Code (Kapitalanlagegesetzbuch – KAGB).