UK post-Brexit financial regulation: the status quo on equivalence
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UK post-Brexit financial regulation: the status quo on equivalence Giuseppe Giusti1 · Khulan Batbayar1
© Europäische Rechtsakademie (ERA) 2020
Abstract Given the extraordinary circumstances the world currently faces due to the COVID-19 outbreak, the energy and focus of the UK and the EU have shifted to dealing with the global pandemic and progress in reaching an arrangement on equivalence post-Brexit appear to have stalled. The purpose of this article is to summarise the status quo on this topic before the interruption began. Keywords Brexit · Equivalence · Third-country regime · Financial regulation · Free trade agreements
1 Introduction On 31 January 2020, the United Kingdom (UK) left the European Union (EU). Until 31 December 2020, the likely end of the transition period, we do not expect to see major changes in terms of financial services regulation. As for what will happen after this period, beginning 1 January 2021, it is difficult to predict the exact circumstances the UK will be in. This depends on the progress and outcome of the negotiations with the EU as well as the free trade agreements (FTAs) the UK is currently negotiating with other states. Currently, the UK is pursuing an FTA with the US with provisions for exporting financial services.1 UK regulators have also entered into a number of Memoranda of Understanding in 2019 with regulators in Asia and Europe. Given the extraordinary circumstances the world currently faces due to the COVID-19 outbreak, the energy and focus of the UK, the EU and most other states 1 https://www.ft.com/content/064c36d0-5e2a-11ea-b0ab-339c2307bcd4.
B G. Giusti 1
FS REG, London, UK
G. Giusti, K. Batbayar
have shifted to dealing with the global pandemic and progress in reaching an arrangement appear to have stalled. The face-to-face Brexit talks between the UK and EU scheduled for March have been postponed although Boris Johnson, the Prime Minister of the UK, insists that this will not result in the end of the transition period being extended. This leaves the UK’s financial services sector in deep uncertainty, particularly in relation to the possibility and scope of a wide-reaching equivalence decision to permit UK firms to continue conducting business in the EU. However, more time is perhaps something that could be useful given the current state of negotiations in regard to the financial services industry. The UK currently appears to find itself subject to a choice of closely aligning its regulatory regime with the EU’s regime to maintain the best possible chance of obtaining equivalence and of diverging and deregulating its regulatory regime to maintain its autonomy and status as a thriving financial centre. Divergence from EU legislation has already been hinted at by Mr. Johnson, and Andrew Bailey, then the Chief Executive of the Financial Conduct Authority (FCA) and now the Governor of the Bank of England. Mr. Bailey has already suggested a “same outcome, lower burden” approach and advocated for an ‘outcomes-based’ equivalence rather than a ‘rules-based’ equivalenc
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