The U.K. Financial Conduct Authority has published a "Dear CEO" letter on firms' cross-border booking models in preparation for Brexit. In the letter the FCA reminds firms that where the firm is expanding its European presence, it must still be possible for the FCA to supervise the firm's U.K. business and firms must still meet their threshold conditions. However, unlike other EU regulators, the FCA is not stipulating specific requirements for booking models. Instead, the FCA states that it is "open to a broad range of legal entity structures or booking models. This includes those making use of back-to-back and remote booking, providing their associated conduct risks are effectively controlled and managed. Our starting point is therefore not to restrict business models but to understand the principles and practice involved and how the conduct risks that arise from them are managed."

The FCA therefore states that booking models should comply with the following principles and be able to demonstrate how they have been implemented:

• firms establish a clear rationale for their booking arrangements, document them and have them approved by the Board;
• a firm's risk management is appropriate for the firm's booking activities, including hedging arrangements;
• firms are able to show that there is a broad alignment of risk and returns at the entity level;
• firms have adequate systems and controls in place to ensure that booking arrangements are followed;
• firms have considered whether responsibility for oversight of booking arrangements should be explicit in statements of responsibilities under the Senior Managers Regime; and
• booking arrangements should not be an impediment to the firm's recovery and resolution.

View the letter.