On 9 July 2020, the European Commission issued a communication on readiness at the end of the transition period between the EU and the UK.
The communication includes a section on financial services (section B1, pages 12 to 15) and the key points include:
- In most areas, such as insurance, commercial bank lending or deposit-taking, equivalence does not allow third-country firms to provide services to the EU but provide prudential or reporting reliefs to EU firms.
- EU equivalence decisions do not replicate the benefits of the Single Market.
- EU equivalence decisions can be unilaterally withdrawn at any time, in particular if third-country frameworks diverge and the conditions for equivalence are no longer fulfilled.
- The EU’s equivalence frameworks are unilateral, neither the equivalence assessments, nor possible decisions for granting equivalence are part of the negotiations with the UK.
- The UK’s stated intention to diverge from the EU’s regulatory and supervisory frameworks in the area of financial services after the transition period requires the Commission to assess UK equivalence in each area on a forward-looking basis.
- On the basis of an analysis conducted with the European Central Bank, the Single Resolution Board and the European Supervisory Authorities, and of the preparation undertaken by financial services firms, the Commission has identified only one area which may present financial stability risks, namely the central clearing counterparties of derivatives. Therefore, in the short term and in order to address the possible risks to financial stability, the Commission is considering the adoption of a time-limited equivalence decision for the UK in this area.
- In a number of areas, the Commission has not initiated an assessment, either because equivalence decisions have already been granted or because, for instance, the EU legal framework in not yet fully in place. With regard to the following areas, the Commission will not adopt an equivalence decision in the short or medium term:
- Directive 2004/109/EC – Transparency Directive – Accounting Standards; Art. 23(4) [first subparagraph, point (ii).
- Directive 2006/43/EC on statutory audits of annual accounts and consolidated accounts (Statutory Audit); Art. 45(6) – Equivalence to the international auditing standards of the standards and requirements in the third country.
- Regulation (EU) N° 600/2014 on markets in financial instruments (MIFIR); Art. 33(2) – Derivatives: trade execution and clearing obligations; Art. 38(3) – Access for third-country trading venues and CCPs; Art. 47(1) – Investment firms providing investment services to EU professional clients and eligible counterparties.
- Directive 2014/65 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID 2 – recast; Art. 25(4)[a] – Regulated markets for the purposes of easier distribution in the EU of certain financial instruments.
- Regulation (EU) No 596/2014 on insider dealing and market manipulation (MAR Market Abuse Regulation); Art.6(6) – Exemption for climate policy activities.
- Regulation (EU) No 236/2012 on short selling and certain aspects of Credit Default Swaps (SSR); Art. 17(2) – Exemption for market making activities.
- Regulation (EU)2017/1129 of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC; Art. 29(3) – Prospectus rules.
The communication adds that insurance operators, banks, investment firms, trading venues and other financial services providers should finalise and implement their preparatory measures by 31 December 2020 at the latest to be ready for the changes that will happen under all scenarios, including wherein their area, there is no equivalence decision taken by the EU or the UK.