What a week. A fractious NATO summit, England gracefully ejected from the World Cup, Boris and DD resigning on ‘principle’ and a Trump visit to the UK. Add to that a post-Chequers proposal for a future ‘equivalence’ relationship with the EU and you have yourself a truly historic few days.
But what does the Chequers Agreement and subsequent white paper mean for financial services?
Bad news.
- For the first time, the Government is moving away from its planned system of ‘mutual recognition’, plumping instead for equivalence.
- Equivalence is the current EU framework whereby it recognises the legal, regulatory and supervisory regime of a non-EU nation, allowing access to an area of financial services – as stipulated in the regulation and law that governs the EU.
- The original plan – mutual recognition – was designed to minimise disruption, giving the UK something close to passporting but without the obligations that brings. This model was rejected by the EU as it lacked the safeguards required to ensure the integrity of the internal market.
The equivalence approach is tantamount to a hard Brexit for financial services. While equivalence operates with other jurisdictions, there are risks and uncertainties of how this will work in practice.
In our view, the post-Chequers white paper only goes to provide further impetus for financial services firms to accelerate their Brexit programmes.
Note: This opinion piece was first published by Catalyst prior to the Davies merger
