2.5 We will have to wait and see if progress is made on this important issue in the coming months. In our view, we should hope for the best, but plan and anticipate the worst, as equivalence decisions for the UK can be long in coming and not happen at all. In the words of the former British European Commissioner for Financial Services about the EU, « why should they do it? » The future financial services relationship between the EU and the UK will be determined by equivalence rather than by passport in the context of the EU`s single market. In the Political Declaration, the UK and the EU are working to complete the equivalence assessments by the end of June 2020, which seems quite ambitious. In July this year, the Commission presented a Communication setting out its overall approach to equivalence and how the regime will deal with Brexit, which will be one of the key issues of 2020. 1.2 With regard to the CCA`s statements on financial services, the short section specifically dedicated to financial services includes: 6.2 The time has come for companies to think about the future – with a view to temporary regulation and taking into account upcoming legislative changes (such as the Draft Financial Services Act), see our article here and any future equivalence decisions that may be made with regard to financial services between the EU and the EU and the UK. The UK`s decision to leave the EU has a significant impact on the European financial services sector. In particular, Brexit will have consequences for UK-based financial institutions that rely on the European Economic Area (« EEA ») « passport » to access the European single market for financial services. On 13 November 2018, the European Commission published a Communication (available here) setting out certain emergency measures in the event that the draft Withdrawal Agreement is not ratified by the UK and the EU by 29 March 2019 (i.e. a « no-deal Brexit »).
The Communication states that companies should speed up preparations when the UK is no longer part of the EU`s single market, for example by adapting their contracts or relocating capacity and activities to one or more of the other EU Member States. This follows the guidelines of the European Supervisory Authorities, including an opinion of the European Banking Authority published in June 2018 on the need for financial institutions to prepare for Brexit (available here). The EU sees the end of October as the final deadline for signing a trade deal with the UK. If an agreement is reached during this period, both parties must ensure that each agreement is ratified in time for its entry into force by 1 January 2021. At present, however, there are significant differences between the EU and the UK in the areas of state aid, fisheries, a level playing field and governance. For example, insurance companies in the UK are already looking to change the implementation of Solvency II at the end of the transition period. The Prudential Regulation Authority, the regulator of the insurance industry in the UK, had previously recognised problems with the risk margin under Solvency II, but was unable to make any changes as this would require an agreement at EU level. In the event that the agreement and the transition period have not entered into force, the FCA has announced a Temporary Authorisation System (« TPR ») for EEA companies and funds, which will allow companies to continue to exercise their passport rights in the UK and funds to continue marketing in the UK if they choose to participate.
for a temporary period of up to three years until full authorisation is requested. A similar regulation will be adopted on the 1st. The agreement and transition period are expected to enter into force in January 2021, but the subsequent agreement between the UK and the EU does not contain an agreement on financial services. 1. The Union and the United Kingdom agree to establish structured regulatory cooperation in the field of financial services in order to establish a lasting and stable relationship between autonomous legal systems. Based on a shared commitment to safeguard financial stability, market integrity and investor and consumer protection, these agreements will allow for the following: the UK has already granted equivalence to the EU in a number of areas of financial services and, as a former Member State, its regulatory system is one of the most equivalent regimes, if not the most, to that of the EU. However, the stumbling block for positive EU equivalence provisions now appears to be how the UK regulatory system will operate after 1 January 2021. In a question-and-answer document on the deal, the Commission said a number of additional clarifications were needed, « in particular as regards how the UK will deviate from the EU framework after 31 December, how it will use its regulatory discretion vis-à-vis EU companies and how the UK`s temporary arrangements will affect EU businesses ». The Commission added that equivalence rights would only be granted « if they are in the interest of the EU ».
Another important point to note here is the extent to which each Member State has already granted and can continue to grant unilateral access on a bilateral basis. A number of Member States allow such access. . . .