UK Government – Framework for the UK-EU partnership in financial services
On 20 August 2018, the UK Government published a presentation setting out its views on the framework for the UK-EU partnership in financial services. The presentation follows the UK Government’s White Paper on the future EU / UK relationship.
Key themes in the presentation include:
- principle of autonomy. Each party to determine its own rulebook and assess whether access to its market is maintained. Each side’s legislative process and rulemaking would be autonomous, where each of the UK and the EU would be answerable to their respective political and judicial frameworks. The criteria for determining if a foreign jurisdiction has equivalent standards and supervision for a given sector would be autonomous. The decision to grant or withdraw equivalence would be an autonomous judgement. There would be no recourse to the EU/UK Dispute Resolution Mechanism for autonomous matters – only for commitments included in the bilateral, Treaty-based agreement;
- equivalent at the outset. The UK and EU are starting with the same rulebook and entwined supervision. Initial reciprocal recognition agreed for all third country regimes;
- expanded scope of activities permitted cross-border. The UK Government states that it is not proposing an expansion of the third country equivalence regime to all the areas covered by the passport. Instead, it is proposing “that the scope of the relationship should be defined appropriately in relation to mutually economically beneficial global market activity”;
- common principles. Agree common principles for the governance of the EU / UK relationship including commitments to global norms, and that equivalence is an evidence-based judgement on the equivalence of outcomes;
- regulatory and supervisory cooperation. The UK Government proposes creating a system for supervisory cooperation including, for example: commitments around consultation in relation to supervisory actions; escalation to discuss difficulties either party faces cross-border; and crisis cooperation arrangements; and
- structured withdrawal. This includes: (i) consultation and discussion before loss of access to either market; (ii) ability to try and find solutions; (iii) clear timelines and notice-periods; (iv) time for businesses and supervisors to adapt to change on either side; and (v) address acquired rights, safeguarding existing obligations to customers if equivalence is withdrawn.
The UK Government concludes that the proposals put forward “represents a deal that avoids needless fragmentation and divergence of our markets, of our shared regulatory rulebook, and of cross-border supervisory cooperation.”