On July 16, 2018, a draft of the Building Societies Legislation (Amendment) (EU Exit) Regulations 2018 was laid before Parliament. The Regulations will come into force on the day the U.K. withdraws from the EU.
The draft Regulations have been prepared using the power under the European Union (Withdrawal) Act 2018 to address failures of retained EU law to operate effectively or other deficiencies arising from the withdrawal of the U.K. from the EU. The draft Regulations make amendments to various U.K. primary and secondary legislation that relate to building societies. The amendments remove references to EEA countries and territories, EU directives and EU member states that will no longer be appropriate following the U.K.'s withdrawal. In addition, the amendments remove provisions that provide reciprocal treatment to borrowers whose loans are secured on land in an EEA state and to bodies incorporated in an EEA state.
The draft explanatory memorandum accompanying the draft Regulations states that one impact of the amendments will be that loans secured on properties in the EEA following the U.K.'s withdrawal will no longer count towards the calculation of the building societies lending limit (which requires that 75% of a building societies' assets are secured on residential property). Another impact will be that borrowers taking out a mortgage with a building society on property in the EEA will no longer automatically become members of that society.
The EU (Withdrawal) Act 2018 sets out an enhanced scrutiny procedure for secondary legislation used to amend certain retained EU law. This means that the draft Regulations will require the approval of both Houses of Parliament before they are made.
The draft Regulations are available at: http://www.legislation.gov.uk/ukdsi/2018/9780111171554/pdfs/ukdsi_9780111171554_en.pdf, the draft explanatory memorandum is available at: http://www.legislation.gov.uk/ukdsi/2018/9780111171554/pdfs/ukdsiem_9780111171554_en.pdf, details of the proposed approach to onshoring EU legislation are available at: https://finreg.shearman.com/uk-government-and-regulators-set-out-approach-to- and details of the EU (Withdrawal) Act 2018 are available at: https://finreg.shearman.com/uk-brexit-legislation-receives-royal-assent.
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