Equivalence Is No Solution For Most UK Financial Services Accessing The EEA

At the end of 2020, any UK financial firms operating in the EEA under a 'passport' will lose that right. They must either get a new subsidiary authorised in an EU/EEA country and passport from there, or get the subsidiary registered as an agent etc of a local firm with the right passports. Meanwhile, there are calls for the UK government to ask the EU to declare that UK financial regulation is "equivalent" to standards under EU law, so UK firms can continue to access the single market under UK rules. Here's why nobody should wait for that.

The UK has no 'right' to equivalence, even if it can demonstrate a basis for it.

Equivalence is at the discretion of the European Commission, so political considerations can affect the outcome and timing.

Equivalence can be withdraw at any time without any right of appeal (ask the Swiss).

Only two areas of EU financial regulation allow for equivalence - MiFID (2,250 firms as at August 2016) and AIFMD (212 firms).  In particular, an equivalence finding is not available for deposit-taking (102 banks), insurance (220 firms), insurance distribution (2,758 firms), e-money issuers (66) or other payment services providers (284).

While there have been calls within the EU for a broader framework, the European Commission has considered it and explained that this would be "extremely difficult".

Relying on equivalence would also require the UK to align with EU regulation in the relevant area, with no say in shaping the rules. The UK government is sending mixed messages on this point, having repeatedly said that it is against alignment while repeatedly claiming that it wants future trade arrangements (e.g. a 'Canada deal') that would require it. Johnson is probably hoping that his voters won't understand the magic trick, but everybody else does. Either way, the government is along way from being able to help the Commission work through an "extremely difficult" equivalence process.

You're on your own. The only viable option is to set up a subsidiary in the EU27 and passport from there. 

 

Let me know if I can help, either in the UK or in Ireland/EEA - particularly on e-money and payment services.