A new report, released today by the International Regulatory Strategy Group (IRSG) in collaboration with Hogan Lovells, concludes that the focus of the Brexit negotiations should be on designing and delivering a bespoke UK-EU deal rather than reforming or adapting existing frameworks.
This bespoke deal should be based on mutual recognition and regulatory cooperation and allow for mutual market access, delivering the same, or comparable, levels of access rights to those currently available.
A summary of the report’s findings:
- Given their limited coverage, uncertainty of availability and the lack of key safeguards associated with them, the EU's current third country regimes do not provide a long-term sustainable solution for the UK-based industry as a whole to access EU markets post-Brexit.
- The analysis reveals that current alternatives to passporting and TCRs for UK-based financial services firms are subject to limitations or are significantly less efficient than existing arrangements. A mutual access arrangement could be put in place as part of the bespoke agreement with mutual market access being granted on the basis that the respective regimes are recognised as being broadly consistent, but the UK should avoid trying to have access rights tied to the EU's existing concept of equivalence. Access rights under a mutual access arrangement should also seek to cover as broad a scope of activities as are currently covered under the passporting regime.
- Arrangements should include robust processes and procedures that provide legal certainty.
- The transition into the new arrangements should allow for continuous access to products and services for firms and customers. The arrangement should also be designed to preserve continuity of operation for UK-based entities regulated at an EU level.
- When the criteria for mutual access have been agreed, the UK and the EU should seek immediate mutual recognition that the other party meets the relevant criteria based on their regimes matching as at Brexit.
- Regulatory cooperation and collaboration between respective regulatory authorities will be essential.
- A mutual access arrangement could be used by the UK as the basis for its relationships with other third countries ongoing. It may also offer the EU a new way of dealing with other third countries.