While everything hinted a hard Brexit, i.e. a Brexit without an agreement settled between the parties, the EU and the UK unexpectedly found common ground on the 24 December 2020. From now on, the “Trade and Cooperation Agreement” (the TCA) is the Treaty that will govern the relationship between the EU and the UK. In addition to provisions relating to the provision of services in general (including financial services), the TCA also comprises a specific section on financial services. However, the UK and EU have not agreed upon a general equivalence mechanism (or mutual recognition regime). To continue business in the EU, UK financial services providers will thus have to comply with local legal obligations on market access (including authorisation requirements) and supervision that equally apply for all other third country providers. 

In addition to the TCA, the EU and UK have also made a (non-binding) Joint declaration on financial services regulatory cooperation in which parties agree that by March 2021 a Memorandum of Understanding should further establish the framework for the cooperation for financial services. In this regard “the Parties will discuss, inter alia, how to move forward on both sides with equivalence determinations between the Union and United Kingdom, without prejudice to the unilateral and autonomous decision-making process of each side”. But as to date, no such rules are in place, the provision of financial services by UK regulated entities in Belgium are subject to the general conditions for third country providers.

In the Q&A below, we envisage the most significant impact of Brexit on the provision of financial services in Belgium or to Belgian residents by UK regulated entities. We focus on the consequences for investment services, banking services and financings, regulated markets, MTFs and OTF and securitisation.  For the impact of Brexit on insurance services, see our specific Q&A here 

The impact of Brexit on choice of English law and of English courts in existing and future financial contracts between professionals we address here

Investment services

Many UK investment firms used to provide financial services in Belgium on the basis of the EU passport established under the Markets in Financial Instruments Directive (“MiFID II”). Since 1 January 2021, they are to be treaty as third-country investment firms.

Pursuant to Article 14 of the Belgian Act of 25 October 2016 on access to the business of investment services and on the supervision of portfolio management and investment advice companies (the Investment Services Act), third-country investment firms may offer MiFID II investment services or perform investment activities in Belgium to professional clients “per se”, as defined in Part I of Annex II to MiFID II, and to eligible counterparties provided:

  • the UK investment firm offers the same services in the UK,
  • it has notified the Belgian supervisor (Financial Services and Markets Authority - FSMA), prior to 1 January 2021, of its intentions to provide services in Belgium, specifying the services it intends to offer and the types of investors it intends to target, and
  • a reciprocity exists for Belgian investment firms, and
  • it is subject to a supervision which is deemed by the FSMA equivalent to that to which investment firms governed by Belgian law are subject as long as the current regime of supervision of investment firms under English law is maintained (thereby remaining based on the rules adopted by the UK as a Member State of the EEA as part of the transposition or implementation of the European rules on financial supervision).

UK investment firms must also adhere to the Belgian (MiFID based) rules of conduct. A posteriori supervision by the FSMA of the investment firm’s compliance is possible.

UK investment firms may propose their services in Belgium to elective professional clients and retail clients only if:

  • the clients are English or have the nationality of the state in which the investment firm has a branch, and
  • it is subject to a supervision which is deemed equivalent by the FSMA to that to which investment firms governed by Belgian law are subject.

If the third country firm wishes to service Belgian elective professional clients or Belgian retail clients, it needs to establish an authorised branch in Belgium (or be able to rely on reverse solicitation (see below)).

Since 1 January 2021, UK UCITS management companies and UK AIF managers must stop conducting collective investment activities they used to perform in Belgium as appointed manager under the EEA Passport regime. Collective management activities includes : (i) management of the investment portfolio of the UCITS or of the AIF, (ii) risk management (for the AIF managers only), (iii) administration of the UCITS or of the AIF and (iv) marketing of the UCITS or AIF in Belgium.

Pursuant to Article 498 of the Belgian Law of 19 April 2014 on alternative investment funds and their managers (the AIFM Law), which implements article 42 of the AIFMD, a Non-EEA manager of an AIF (a Manager), such as a UK Manager since 1 January 2020, may only market interests in the AIF that it manages to professional investors in Belgium provided that the FSMA has approved the AIFM’s Third-Country AIFM Notification Form and the offer does not constitute a public offer within the meaning of the Belgian AIFM Law. Marketing to the public in Belgium of a non-EEA fund requires that:

  • the funds comply with legal requirements applicable to foreign public AIFs;
  • appropriate cooperation arrangements between the FSMA and the UK supervisory authorities are in place, and
  • the UK Manager is subject to a regime at least equivalent to Belgian AIF Managers offering public AIFs.

The UK AIFs became third-country AIFs since 1 January 2021. Therefore, an EEA AIF Manager (other than a UK Manager) may also no longer continue to market UK AIFs in Belgium on the basis of its pre-Brexit notification. To continue such marketing to date the EEA AIF must send the appropriate Third-Country AIF Notification Form to the FSMA first (provided that the offer does not constitute a public offer within the meaning of the AIFM Law). Marketing to the public is subject to additional requirements:

  • these funds must comply with legal requirements applicable to foreign public AIFs,
  • appropriate cooperation arrangements between the FSMA and the UK supervisory authorities and the competent authorities of the home Member State of the EEA AIIF manager must be in place, and
  • a depositary has been appointed for these funds.

The EEA UCITS management company may continue to market UK UCITS in Belgium after 1 January 2021. But as these funds are now third country AIFs, their marketing is subject to the conditions indicated in the above paragraphs.

Reverse solicitation in the meaning of the Investment Services Act (implementing MIFID II) requires that a retail client or a professional client established or situated in Belgium exclusively takes the initiative to request the provision of an investment service by a third country firm. In such a case, the services are not considered to be provided on the Belgian territory. Hence, a notification under Article 14 of the Investment Services Act or Article 498 of the AIFM Act should not be required.

ESMA reminds in a communication of 13 January 2021 that “where a third-country firm solicits clients or potential clients in the Union or promotes or advertises investment services or activities together with ancillary services in the Union, it should not be deemed as a service provided at the own exclusive initiative of the client”. This is true “regardless of any contractual clause or disclaimer purporting to state, for example, that the third country firm will be deemed to respond to the exclusive initiative of the client”.

We recommend being very cautious as the FSMA takes also a conservative approach to the availability of reverse solicitation.

What happens to contracts entered into before 1 January 2021 by UK investment firms that have not been authorised to pursue their activities in Belgium post-Brexit? To date, the FSMA has not taken any position in this regard. The Act of 3 April 2019 on the United Kingdom’s withdrawal from the EU (“Brexit Act”) allows the government to take certain measures in this respect, but such measures have not been enacted yet.

Should measures allow the servicing of existing agreement, a cautious approach will be recommended to determine whether the services concern the continuity of an existing contract or whether the contract triggers new investment services or activities. The latter is only allowed provided that authorisation has been obtained.

The provision of investment services (and generally all regulated services) in Belgium without proper authorisation or license in accordance with the EU and the Belgian applicable law exposes the UK investment service providers to the risk of administrative or even criminal sanctions.

Investors using the services of investment service providers which are not properly authorised in accordance with Belgian law may lose protections granted to them under EU relevant rules, including coverage under the investor compensation schemes in accordance with Directive 97/9/EC on investor-compensation schemes.

Banking services and financings

Since the end of the transition period, it is no longer possible for UK credit institutions to take advantage of the EU passporting regime. As such their UK authorisation is no longer sufficient to offer equivalent banking services within the EU. Consequently, UK credit institutions that contemplate to establish or maintain the provision of banking services to EU clients post-Brexit must apply for an authorisation in each relevant Member State except if they can invoke the so-called ‘reverse solicitation’-exclusion. This exclusion prevents that local authorisation or passporting requirements are triggered if customers are not being actively solicited in the foreign jurisdiction (see above).

In Belgium, non-EEA credit institutions must require an authorisation from the National Bank of Belgium (NBB). 

The continuity of existing contract appears possible only if no new regulated banking services are provided in Belgium. A cautious approach is recommended to determine whether the services concern the continuity of an existing contract or whether the contract triggers new banking services since new banking services require a prior authorisation. Maintaining accounts in the UK for Belgian residents will trigger the risk of providing new services such as carrying out payment services or executing orders to sale or acquire financial instruments. The mere execution of life cycle events (such as the renewal of the contract or the modification of an essential obligation of the contract) may trigger the provision of new regulated services.

Under Belgian law, lending as such is not a regulated activity. Any lender can therefore (continue to) provide unregulated loans to Belgian borrowers.

Exceptions apply with respect to regulated credits such as consumer credits and mortgage credits, whose offer requires a prior authorisation in accordance with Book VII of the Belgian Code of Economic Law. Specific regulatory requirements also exist if loans are granted to SMEs located in Belgium or within the EU. However, the SME Financing Act only applies if the UK lender carries out its professional activities in Belgium or directs its activities to the Belgian territory (e.g. online financings available to Belgian SMEs).

As soon as the financing triggers also the provision of some regulated banking services under the Banking Law of 25 April 2014, an authorisation is required. This will be the case, among other, if the UK lender:

  • accepts deposits or other repayable funds from the public,
  • has an establishment in Belgium which qualifies as a branch,
  • provides payment services or electronic money regulated by the Payment Services Act of 11 March 2018. The notion of ‘payment services’ includes, among others, (i) services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account, (ii) executions of payment transactions, (iii) account information services, and (iv) the remittance of money. Third-country entities must establish a branch in Belgium and obtain prior authorisation from the NBB before offering a payment service in Belgium. The King is mandated to create a legal framework applicable to Belgian branches. To date, such framework still lacks, meaning that in practice, non-EEA payment institutions have no real access to the Belgian payment services market.
  • provide regulated investment services (see above). If non-EEA lenders also envisage to perform such services, they will have to obtain prior authorisation from the FSMA and comply with the obligations arising from the Investment Services Act.

As a consequence of Brexit, UK issuers of securities can no longer rely on the EU prospectus passport to publicly offer bonds to investors in Belgium. Under the Prospectus Regulation an issuer is compliant as long as the prospectus has been approved by the issuer’s ‘home’ Member State. It is therefore possible to offer the bonds to investors in any other EEA Member State without the need to obtain any additional approvals in the investors’ Member States. Post Brexit, UK issuers must obtain a prospectus approval within an EEA Member State in order to publicly offer securities in Belgium. The European Commission has the power to approve a non-EEA prospectus regime if it meets standards which are equivalent to EEA requirements. However, to date, no such “equivalence” is in place for the UK prospectus regime although the UK has “onshored” the EU Prospectus Regulation (i.e. implemented in UK legislation).

In addition, pursuant to the Covered Bonds Law of 3 August 2012 and the Banking Law of 25 April 2014 the issuance of covered bonds is a regulated activity and requires a credit institution to obtain a prior authorisation of the National Bank of Belgium (NBB).

Regulated markets, MTFs and OTFs

The Brexit Act (Act of 3 April 2019 on the United Kingdom’s withdrawal from the EU) authorises the government, upon prior advice of the FSMA and the NBB to regulate the operation of regulated markets, MTFs and OTFs in Belgium by operators of a third country, such as the UK. The government may set out criteria under which such activities are considered to be conducted in Belgium, specifically in case provisions are made allowing users, members or participants in Belgium to access and trade on these markets. To date, no measures have been enacted yet.


EU Regulation (EU) 2017/2402 of 12 December 2017 (the “EU Securitisation Regulation”) took effect on 1 January 2019 and has since applied to all securitisations where the issuer, the originator or the sponsor are located in the European Union. Furthermore, plenty of securitisations have pinned on the so-called “STS label”, a designation for transactions that comply with a myriad of additional transparency and reporting criteria resulting in Simple, Transparent and Standardised securitisations and allowing institutional investors to benefit form a more favourable capital treatment. Since the label is steadily developing into a market standard, STS compliant securitisations have gained favour among investors. What will happen to STS labelled securitisation transactions now the UK is no longer bound by the EU Securitisation Regulation?

The UK withdrawal act of 2018 as amended by the UK withdrawal act of 2020 provides for an onshoring mechanism of existing EU law meaning that EU law as it currently stands will become part of UK domestic law which can subsequently only be amended by UK laws. Lots of statutory work has been done by UK ministers to ensure that the retained EU law continues to operate in a non-EU context. In this respect, the Securitisation (Amendment) (EU Exit) Regulations 2019 (the “UK Securitisation Regulations”) have been put in place amending the EU Securitisation Regulation to ensure its applicability in the UK after the transition period. Besides practical changes, such as replacing references to the EU, EBA and ESMA by references to the UK, the FCA and the PRA, the UK Securitisation Regulations also introduce more significant changes. Needless to say, that with the EU and the UK regime being similar but not identical ,such dual regime may create hurdles for cross-border transactions.

Some of the amendments made by the UK Securitisation Regulations to the existing set of EU rules, provide more flexibility in the STS requirements. Where the EU Securitisation Regulation requires that the issuer, the sponsor and the originator must be established within the EU, the UK Securitisation Regulations require that only the sponsor be established in the UK for asset-backed commercial paper (ABCP) securitisations and that only the originator and the sponsor (not the issuer) be established in the UK for non-ABCP programmes. Also, where such parties are located in a third country, one must only verify that they provide information which is “substantially the same” as the information that would have been made available if such parties were UK based. These changes might open some new doors for future UK securitisations aspiring to be Simple, Transparent and Standardised.

But what happens to existing STS securitisations on 1 January 2021? Transactions which were notified to ESMA as STS compliant before the end of the transition period or within the next two years, will benefit from grandfathering measures recognising them as STS in the UK for the life of the transaction. To date, no equivalent measure recognising UK STS securitisations exists on the EU’s side. Moreover, existing STS compliant transactions with a sponsor, issuer or originator located in the UK will no longer satisfy the STS geographic requirements set out in the EU Securitisation Regulation and will therefore lose their STS status. This means that the preferential capital treatment accorded to investments in STS securitisations will be lost. The Joint Committee of European Supervisory Authorities advises all EU institutional investors such as credit institutions and insurance entities, holding positions in STS compliant transactions, to carefully assess the impact hereof on their balance sheet and investments prior to the start of the new year. Steps to be taken may include reviewing the mitigating measures already included in existing transaction documentation, considering whether EU based companies could be used to replace any UK originator, issuer or sponsor and what the related consent and amendment process looks like and actively liaising with investors to restructure existing issuances to prevent them from losing their STS label.