Equivalence
European Union (EU) regulation.
In certain cases the EU may recognise that a non-EU legal, regulatory and/or supervisory regime is 'equivalent' to the corresponding EU framework.
That recognition, in turn, means authorities in the EU may rely on supervised entities’ compliance with the equivalent non-EU framework, and allow the entity to operate more freely than it might otherwise be able to (without equivalence).
This approach is designed to bring benefits to both the EU and third-country financial markets.
The significance of the equivalence concept, for UK financial services, is that the UK might choose, post-Brexit, to keep its regulatory regime closely aligned with the EU regime, in order to benefit from the possibility of equivalence.
Equivalence recognition unlikely
- "In addition to disrupting supply chains, Brexit has caused some fragmentation of banking activity for corporates.
- It seems increasingly unlikely that we shall see ‘equivalence’ recognition for UK/EU financial services that were not covered by the Trade & Cooperation Agreement.
- Treasurers will want to monitor the expiry dates (some in 2022) of various temporary permissions that came into effect post-Brexit, and to ask their banks whether there may be any implications for corporate clients."
- The Treasurer magazine, Issue 4, 2021, p31 - Treasury in 2022.
Equivalence and passporting
- "In brief, equivalence is the willingness of one regulator to accept that another regulator's rules achieve the same regulatory outcomes as their own, and so some element of cross-border activity can be allowed.
- Equivalence must be agreed, but is subject to negotiation, market by market.
- Passporting is the acceptance that once permitted to trade in one state, a business can trade in another without further compliance requirements."
- The Treasurer magazine, March 2017, p12 - Technical briefing.
See also
- Brexit
- EU-UK Trade and Cooperation Agreement
- European Economic Area
- European Union
- Free movement of labour
- Gold-plating
- Harmonisation
- Passporting
- Prudential Regulation Authority
- Schengen Area
- Single Market
Other links
Rethinking UK financial services regulation after Brexit, UK in a Changing Europe, December 2020
UK-EU future relationships: options for equivalence, Institute for Government, February 2020
