The International Regulatory Strategy Group will propose a bespoke pact between the E.U. and the U.K. in order to maintain reciprocal market access rights for financial institutions after the Article 50 deadline (March 2019).
Following the EU’s Third-Country Regimes and Alternatives to Passporting report on the objectives the U.K. Government should focus on obtaining from the Brexit negotiations (summary here), the proposal on Mutual Recognition – A Basis for Market Access After Brexit (summary here) follows the same rationale and gives further details on the regulatory framework on financial services that should form the basis of the future E.U.-U.K. Free Trade Agreement.
The April report, in which the Financial Regulatory Group proposed a framework for mutual ‘market access in financial and professional services’, puts forward the ‘criteria for access’, ‘mechanisms for assessing and maintaining regulatory alignment’ and the ‘dispute resolution model’ that would enable trade to continue with ‘minimal disruptions’ to financial services users.
The essence of the report is based on the idea that the U.K. Government intends to secure ‘the widest possible rights of access’ for businesses and focuses therefore on models that seek to maintain, to the biggest extent possible, the current status in the sector.
However, the April report concluded that ‘a further paper will consider all the issues raised in this Report’ which should be forwarded to the U.K. Government in September (according to Reuters). Reuters also reported in its article that ‘[n]o such trade pact in financial services has been tried before’.
Should a deal not be reached by March 2019 with the E.U.-27, U.K.-based financial institutions will no longer be able to conduct cross-border business, nor will they have access to Member States’ markets, since the U.K. will have a third-country status (if the EU-27 does not unanimously vote for extending the deadline (see Article 50(3) TFEU).