Simply put, the temporary permissions regime is a back-stop should the EU and UK not finalise the Withdrawal Agreement.
In December last year HM Treasury announced that, if necessary, the UK Government would legislate for a temporary permissions regime and both the PRA and FCA referred to it in their respective statements on Brexit preparation which were published at the same time. In its statement the PRA referred to the temporary permissions regime as a “fall-back” in a no deal, hard Brexit scenario.
At 11pm on March 29, 2019 (Brexit Day) the UK will leave the EU per Article 50 of the Treaty of the European Union. If the Withdrawal Agreement is ratified by both sides in accordance with their own procedures a transition period (also known as an implementation period) will take effect allowing market access on the current basis until December 31, 2020 (i.e. UK firms would have access to the EU Single Market, and EEA firms would have access to the UK market).
However, if the Withdrawal Agreement is not ratified before Brexit Day there will be no transition period and EEA firms would suddenly not be able to operate in the UK without UK authorisation and this may cause major disruption. Therefore, the temporary permissions regime is designed to mitigate the so-called “cliff-edge” effects of this scenario in the UK. Importantly it is only required in a no-deal scenario.
We already saw the FCA conduct preparatory work for the temporary permissions regime earlier this year. In March, it published a new page on its website asking UK inbound firms and funds to complete an online survey so that it could easily identify such firms.