Brexit

EU's third-country equivalence process

Since the 2008 financial crisis more than 40 new pieces of EU financial legislation have been adopted, and 15 of these include third-country provisions. The EU’s approach to third-country equivalence has been fragmented and the legislators and the Commission are aware of the inconsistencies contained in different legislative acts on the approach to third-country equivalence. In general, the Commission's approach to date has been to tailor equivalence provisions to the needs of each specific legislative act as opposed to viewing equivalence on a country-by-country basis.

In September 2018, the EU parliament voted to adopt a non-binding resolution on relationships between the EU and third countries in relation to financial services regulation and supervision. The resolution had been proposed by the EU parliament's Committee on Economic and Monetary Affairs (ECON) and was forwarded to the EU Commission and the Council of the EU following the EU parliament vote.

The EU parliament's September 2018 resolution highlighted the following points:

  • equivalence decisions should be taken in the best interests of the EU having regard to the financial stability of the EU or of one or more of the member states, market integrity and consumer protection and the functioning of the internal market;
  • transparency of the equivalence process would be improved by setting up a structured, horizontal and practical framework, along with guidelines regarding the recognition of third-country supervisory frameworks and a level of granularity of the assessment of such frameworks;
  • the EU's equivalence process would benefit from the EU Parliament having more visibility of, and potentially involvement in, the process;
  • the European supervisory authorities (ESAs) should have the power to advise the Commission and review regulatory and supervisory developments in third countries. The ESAs should also provide continuous monitoring to ensure equivalence decisions remain relevant over time;
  • the EU Commission should review and provide a clear framework for a transparent, coherent and consistent application of equivalence procedures which introduces an improved process for the determination, review, suspension or withdrawal of equivalence.
No trade agreement negotiated by the EU has ever incorporated cross-border mutual access provisions on financial services and the resolution requests the Commission to consider introducing an application process for granting equivalence for third counties.

charles.portsmouth@moorestephens.com