Equivalence is dead … the UK must lose EU shackles - by Barnabas Reynolds for the Telegraph 17.04.21

Barnabas Reynolds is a partner at Shearman & Sterling and the author of Restoring UK Law: Freeing the UK’s Global Financial Market, published by Politeia


EU vs the City | What is equivalence?


One of the biggest post-Brexit concerns in the City is over regulatory equivalence.

Financial services were largely excluded from the trade deal agreed by Britain and the EU at the end of last year, resulting in less access to the Continent.

For UK firms to have access to the EU Single Market in areas not covered by the Brexit trade agreement, they need the EU to grant the sector equivalence.


Equivalence is the recognition that a sector meets a country or trading body's standards of regulation. It covers regulated services such as insurance, auditing, exchanges and investment and allows them to operate in its internal market.

The UK has granted equivalence to the EU across 28 sectors. So far, Brussels has mostly refused to reciprocate, with the exception of clearing, which would have otherwise endangered the European financial system.


Equivalence is granted unilaterally and can theoretically be withdrawn with just 30 days’ notice.


What happens next?

Britain and the EU are working on a memorandum of understanding that should create a post-Brexit framework for financial regulation between the two in the hope it will grant London more access.


But negotiations have been fraught, with the governor of the Bank of England, Andrew Bailey, warning that the UK will not be forced to follow EU banking regulations and must be allowed to set its own independent rules.


Mr Bailey has suggested that Brussels is weaponising equivalence to lock Britain into its system as a regulatory satellite and warned that the European Union of trying to seize part of London’s prized derivatives clearing market by putting an end date on its equivalence agreement.


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