Mind the Gap! is “Equivalence” equivalent to “Passporting”?
8 November 2016
Industries: Financial Institutions, Insurance
Jurisdictions: United Kingdom
Services: Financial Services
In this note, we explore the key differences between passporting and equivalence regimes.
The future direction of the UK’s financial services industry will be shaped by the extent to which firms can continue to access the EEA based on a UK authorisation (and vice versa). Understanding the gaps between the access offered by “equivalence” and the status quo of “passporting” will assist the UK and EU in working together to design the optimum future access arrangements for financial services for the benefit of businesses and consumers across the EEA as well as in the UK and also to achieve a stable transition.
Currently UK-authorised firms use “passporting” rights to access the EEA but those rights automatically lapse on Brexit when EU laws cease to cover the UK. If no replacement arrangements are agreed, UK firms’ ongoing access to EEA states would be based on the access permitted to non-EEA firms (Third Country Firms) under EU law provisions known as the “Third Country Regime” (TCR). This relies on the UK maintaining a legal, regulatory and supervisory framework for financial services which is “equivalent” to the EU’s, so this access regime is sometimes referred to as “equivalence”. It also typically depends on EU institutions recognising the firm seeking access, following an assessment of the firm as well as the “equivalence” of the firm’s domestic regime. In this note, we explore the key differences between passporting and equivalence regimes.
Find out more here.