On 1 November, The Times newspaper reported, a tentative deal had been reached on all aspects of a future EU-UK partnership on financial services, as well as exchange of data and including what would amount to a concession from the EU on bending the ‘equivalence’ rules.
Although a denial from both UK and EU officials followed immediately the news fired up speculations regarding a possible breakthrough in the Brexit negotiations.
On Monday, 5 November, the Financial Times titled:
“Unlikely consensus reigns in Brexit financial services talks“1
This article reinforces the assumption, that post Brexit’s trade in Financial Services might be governed by an Equivalence regime. “Equivalence” means, that decisions are taken independently by each side. Such an arrangement would prevent the necessity of a full-fledged treaty and allow non-EU institutions to do business within the EU in specific areas, under the condition that the businesses‘ home countries are considered to adhere to equivalent standards of oversight.
So, does this in fact mean, there is an agreement to dissolve the uncertainties that Brexit holds for the Financial Services industry on both sides of channel?
Oscar McCarthy, Associate Partner at Avantage Reply and Brexit expert, remains sceptical:
“Relying on an Equivalence regime only covers one-third of financial services activities - for example, it excludes commercial banking, primary insurance, securities trading and corporate lending - and creates significant political risk, since these permissions can be revoked with 30 days notice.
It implies the permanent loss of much of the City’s EU27, non-institutional business, much of which will – given the restrictive nature of Equivalence – need to (re-) booked in an EU entity.”
For an overview of the possible Brexit scenarios and their impact on the Financial Services industry, please refer to our white paper: https://www.reply.com/avantage-reply/en/Shared%20Documents/The-Impact-of-Brexit-on-Financial-Institutions-white-paper.pdf
1 The Financial Times Article, “Unlikely consensus reigns in Brexit financial services talks" (5. November 2018), is available with a paid subscription under: https://www.ft.com/content/3d902998-deb1-11e8-9f04-38d397e6661c