On October 11, UK Finance published a Brexit quick brief on equivalence in a future EU-UK trade framework for financial services (“BQB12“). This was developed in collaboration with Clifford Chance LLP and Global Counsel LLP.

The Brexit quick brief analyses the EU’s use of equivalence in financial services. Potential problems arising from the current equivalence regimes in the context of the UK’s relationship with the EU following Brexit were highlighted. The Brexit quick brief also summarizes potential reforms to equivalence proposed at an EU level. The Brexit quick brief also analyses the UK government’s initial proposals for a future trading relationship with the EU in financial services, which contemplated an enhanced form of the EU’s equivalence regime.

UK Finance concludes that the existing EU equivalence framework is far from ideal as the foundations for a future EU-UK trading relationship in financial services. It calls for a range of improvements to the framework relating to:

• The scope of the current EU equivalence regime’s coverage of cross border trade.
• The timely activation of the relevant regimes in EU legislation enabling cross-border trade coverage.
• The transparency, consistency and collaboration with which equivalence determinations are reached.
• The protections for businesses and their customers that are built into the protocols for withdrawing equivalence determinations.

UK Finance also calls for any and all equivalence determinations possible between the EU and the UK to be made and become operational at the point the UK leaves the EU single market, even in a no deal scenario.

UK Finance suggests that the above developments and contingency planning steps could be applied through a mix of binding commitments in an EU-UK free trade agreement (“FTA“) or association agreement, unilateral legislative and regulatory change and regulatory and supervisory co-operation, or a combination of these instruments.