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EC moves on delayed post-Brexit financial services agreement

Author: ICAEW Insights

Published: 26 May 2023

The agreement provides a way forward for a shared commitment to preserve financial stability, market integrity and consumer and investor protection, as well as the creation of a Joint EU-UK Financial Regulatory Forum.

The European Commission (EC) has adopted a draft Memorandum of Understanding (MoU) establishing a framework for regulatory cooperation in financial services with the UK. 

This follows on from the Joint Declaration on Financial Services Regulatory Cooperation between the European Union and the UK, which accompanies the Trade and Cooperation Agreement (TCA). The MoU is subject to final political endorsement by the European Council before formal signature.

Mairead McGuinness, Commissioner for Financial Services, Financial Stability and Capital Markets Union, says: “The Windsor Framework allowed the EU and the UK to open a new chapter in our partnership based on a spirit of mutual trust and cooperation. 

“I am confident that our relationship and future engagement in financial services will be built on a shared commitment to preserve financial stability, market integrity and the protection of consumers and investors."

Dr Susanna Di Feliciantonio, Head of European Policy, ICAEW, says: “A tangible sign of an improving relationship between the EU and the UK, ratification of the MoU should further enhance transparency around financial services regulatory developments and facilitate dialogue and cooperation on global challenges facing both signs.” 

The MoU, once signed by both parties, will create the administrative framework for voluntary regulatory cooperation in financial services between the EU and the UK, outside of the TCA structures. 

The post-Brexit agreement will also include the creation of a Joint EU-UK Financial Regulatory Forum, which will serve as a platform to facilitate structured dialogue on issues related to financial services, similar to what the EU has in place with other third country jurisdictions, such as the US.

The MoU does not deal with access of UK-based companies to the Single Market – or EU firms’ access to the UK market – nor does it prejudge the adoption of equivalence decisions.

Chris Cummings, CEO of the Investment Association, says: “The adoption of the MoU on financial services by the Commission is a major step forward in achieving closer cooperation between the UK and EU, and is greatly welcomed by the UK investment management industry, which manages £2.7tn on behalf of overseas clients. 

“A close partnership between the UK and EU, which recognises the long-shared history of cooperation, can help ensure a resilient and dynamic financial services sector that benefits citizens and businesses across Europe. We look forward to seeing this delivered through the newly created Joint UK-EU Financial Regulatory Forum as soon as possible.”

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