As noted by the Chancellor, the EU and the UK committed in the agreement to create a Memorandum of Understanding by March 2021 to create a framework for regulatory cooperation in financial services. REGULATORS IN THE UK and the EU already have a number of memoranda of understanding. For example, the Financial Conduct Authority has concluded a Memorandum of Understanding with the European Securities and Markets Authority (ESMA) and EU national regulators on supervisory cooperation, enforcement and exchange of information. The agreement proposed in the agreement should build on the existing good work of EU and UK regulators in promoting cooperation. Pursuant to this Article, the EU or the United Kingdom (which is either “Party”) shall submit membership, participation in or access to a self-regulatory organization in order to enable financial service suppliers of the other Party to provide financial services in its territory, that Party shall ensure that the self-regulatory organization fulfils the obligations under national treatment (Articles SERVIN 2.3 and 3.4) and that the Treatment of the Nation the most favoured (Articles SERVIN 2.4 and 3.5). On 24 December 2020, after intense negotiations, the European Commission and the UK government reached an agreement on the terms of future trade and cooperation between the EU and the UK. Immediate impact – Service providers` access to the EU and UK financial services market is no longer possible under EU passport rights. Compliance with local legal market access obligations, including licensing requirements and monitoring, is required to continue doing business. These obligations do not apply if and to the extent that the AUTHORITIES OF THE EU and the UNITED KINGDOM make equivalent findings for the respective field of activity.
Currently, only UK CCPs are allowed to access the EU market on an equivalence basis. While it cannot compete with the level of economic integration that existed at the time of the UK`s EU member states, the Trade and Cooperation Agreement goes beyond traditional free trade agreements and provides a solid basis for maintaining our long-standing friendship and cooperation. The agreement does not contain any decision on equivalence for the financial services sector. Equivalence decisions are unilateral decisions and are not subject to negotiation. This applies to both financial services and other areas such as data protection. Prudential exclusion – As provided for in the CETA agreement between the EU and Canada, nothing in the agreement prevents the UK or the EU from taking or maintaining measures for prudential reasons (Article SERVIN.5.39). Such measures shall include: (a) the protection of investors, depositors, policyholders or persons to whom a financial service provider has a fiduciary duty; or (b) ensure the integrity and stability of the Party`s financial system (Article SERVIN.5.39, paragraph 1). Under this rule, for example, the EU and the UK can unilaterally determine the requirement for surveillance, reporting and continuous monitoring powers in their respective jurisdictions. This may significantly limit the trade-enhancing function of the Financial Services Agreement. On 26 March 2021, the UK Treasury confirmed that technical discussions on the text of the Memorandum of Understanding with the European Commission had been concluded.
The MoU establishes a joint forum on financial regulation between the UK and the EU, which will serve as a platform to facilitate dialogue on financial services issues. Before the MoU can be signed, formal steps must be taken on both sides, but it is expected that this can be done quickly. Joint Statement and Memorandum of Understanding – The Agreement does not contain any elements related to the Equivalence Framework for Financial Services. However, in the Joint Statement, the EU and the UK stated that their agreements would allow for transparency and appropriate dialogue in the adoption, suspension and withdrawal of equivalence decisions in the next structured regulatory cooperation in the field of financial services. Part of the MOU, which is expected by March 2021, will consist of a discussion on how to move forward on both sides with equivalency provisions, without prejudice to each party`s unilateral and autonomous decision-making process. The agreement regulates market access for financial services companies in the same way as other EU external trade agreements with third countries, as they must comply with eu market access obligations, including licensing and supervisory requirements. International Standards – Both parties are working to include internationally agreed standards in the financial services sector for regulation and supervision (Article SERVIN.5.41). .