Financial services – the Brexit deal and how we get equivalence
‘We’re not going to regress’ and no cross retaliation – we review how the deal will impact this sector.
On financial services, the Brexit deal “perhaps does not go as far as we would like” says Prime Minister Boris Johnson, because there is no definite commitment on market access, and measures remain in the agreement for the possible imposition of tariffs if the UK moves notably from existing standards.
As the Prime Minister says, this shouldn’t be seen as too restrictive. The Guardian reports “All that’s really saying is the UK won’t immediately send children up chimneys or pour raw sewage all over its beaches”. The Prime Minister said, “We’re not going to regress, and you’d expect that.”
Let’s look at the positives - the Government did have success by excluding financial services from ‘cross retaliation’ measures if other parts of the trade agreement were breached, which was quite crucial. They also prevented measures that could have restricted EU firms from outsourcing lucrative work to the UK.
And, on equivalence, the parties will discuss how to move forward on equivalence determinations, permitting financial services institutions equivalent market access. The parties intend to codify the framework for regulatory cooperation in a Memorandum of Understanding. It seems that where this leads to is a deal that sort of says ‘we’ll agree to agree’. Could the UK regulated companies see the EU collectively grant ‘equivalence’ or, in the alternative, UK regulated businesses having to seek permissions for financial services transactions from individual member states?
A number of financial institutions have shown confidence in this approach and are already operating under the EU standards. They certainly don’t intend to regress.
For further advice or information, please contact our banking and finance solicitors.