As Brexit negotiations continue to dominate the headlines, one of the most pressing issues to be resolved is the future of the financial services industry between the UK and EU. In March 2021, the EU and UK reached an agreement on a framework for their future relationship in financial services. This agreement is set to govern the relationship between the two parties and is aimed at ensuring that financial services businesses can continue to operate smoothly, while also protecting the interests of consumers.
The agreement covers a range of areas, including banking, insurance, and securities regulation. One of the key provisions is mutual recognition of each other`s regulatory frameworks. This means that UK-based financial services businesses will continue to have access to EU markets, and vice versa, provided that they meet the necessary regulatory requirements. Previously, UK-based financial services firms had to obtain separate authorizations to operate in EU countries – a process that could be time-consuming and costly.
Another important aspect of the agreement is the commitment to maintaining a close dialogue between the UK and EU regulators. This will help to ensure that financial regulations remain aligned and that any changes are made in a coordinated and transparent way. The two parties have also committed to working together on developing new regulations where necessary, which will help to maintain a level playing field for businesses.
The agreement also includes provisions on data protection, which is particularly important for financial services businesses. This will ensure that personal data can continue to be transferred between the UK and EU without interruption. This is crucial, as many financial services rely on the transfer of personal data for their day-to-day operations.
While the agreement is a positive step forward, there are still some areas that need to be resolved. For example, there is still uncertainty around equivalence decisions – where the EU determines whether UK regulations are equivalent to their own. The EU has been slow to grant equivalence decisions in some areas, such as clearing houses, which has led to some UK-based businesses having to relocate to EU countries.
Overall, the EU-UK financial services agreement is a positive development for the industry. It provides a framework for businesses to continue operating smoothly, while also protecting the interests of consumers. However, there are still some challenges to be overcome – particularly around equivalence decisions – and it will be important for the UK and EU to continue their dialogue and cooperation in the coming months and years.