Context and Background
On October 22, the House of Commons European Scrutiny Committee (the Committee) published its first report of session 2019/20 (the Report). In section 10, this includes consideration of the UK's access to the EU financial services markets after Brexit and, more specifically, the European Commission's recent review of the EU law on equivalence.
The notion of equivalence, and its importance in this context, was explained by the European Commission in a Press Release dated July 29 where it stated that:
EU equivalence has become a significant tool in recent years, fostering integration of global financial markets and cooperation with third-country authorities. The EU assesses the overall policy context and to what extent the regulatory regimes of a given third country achieves the same outcomes as its own rules. A positive equivalence decision, which is a unilateral measure by the Commission, allows EU authorities to rely on third-country rules and supervision, allowing market participants from third countries who are active in the EU to comply with only one set of rules.
However, the Report notes that, in light of Brexit, the financial industry of the UK will face a number of hurdles in relation to the provision of services to EU based customers. It is explained that the current, automatic right of market access for banks, insurers and investment firms based on their UK-issued licence (known as 'passporting') will automatically fall away when EU law ceases to apply to and in the UK.
Where these rights fall away and, to the extent EU law ceases to apply in the UK, UK firms and business providing these services will have to comply with local regulations to access any of the EU's national markets. Alternatively, the UK will need to apply for equivalence. Concerning...