Member of European Parliament Markus Ferber has said that comments made by Commission officials about plans to tighten the EU’s equivalence regime may have been political manoeuvring ahead of the formal Brexit negotiations.
But Ferber, who is also the vice-chair of the European Parliament’s Committee on Economic and Monetary Affairs, insists that reviewing the issue of equivalence still makes sense in its own right.The Commission’s comments, made in the Financial Times on Monday suggested that officials are re-examining existing equivalence rules, with an eye to streamlining and strengthening the approval process so it is more rigorous for systemically relevant jurisdictions. One senior official said: “EU equivalence is not automatic and is not a right.” The move would likely damage the UK’s chances of accessing the single market through reciprocity.
“It is quite obvious that one of the UK’s key concerns will be keeping access to the single market for financial services,” Ferber told IFLR. “It would be outright stupid not to use this piece of information in the negotiations as a bargaining chip. So, yes there might be a bit of political maneuvering involved,” he added.
Equivalence offers market access to groups based in countries that can show that their financial sector regulation is just as tough as that of Europe. The possibility is set out in various pieces of EU regulation governing financial trading.
There are exceptions though: the Capital Adequacy Directive and the Undertakings for Collective Investment in Transferable Securities (Ucits) Directive have no equivalence provisions. And while some institutions view existing provisions as useful bridges, they do not always form a basis for business planning.
- German MEP Markus Ferber has said that comments made by Commission officials about plans to tighten the EU’s equivalence regime may have been political maneuvering ahead of the formal Brexit negotiations;
- The move would likely damage the UK’s chances of accessing the single market through reciprocity;
- Ferber argues that the third country regimes in key pieces of financial services legislation have never been designed for the UK;
- He also said that despite all its flaws, the equivalence procedure is conceptually the simplest outcome.
Nevertheless, many in the industry have been hopeful of employing equivalence to side-step market access concerns once Britain leaves the EU. And Ferber is opposed to the approach.
“With Brexit in mind, it’s quite clear that accessing the single market from outside should not be as easy as accessing it from within the EU,” he said. “Otherwise we would clearly set the wrong incentives. So yes, access to the single market from third countries will always be and must always be the more burdensome option,” he added.
"It would be stupid not to use this piece of information in the negotiations as a bargaining chip"
Ferber argues that the third country regimes in key pieces of financial services legislation have never been designed for the UK. He uses the Markets in Financial Instruments Directive II (Mifid II) as an example, arguing that when the Commission was discussing third country issues in the directive, it was in the context of accommodating Switzerland, not the UK.
“In this light, it does definitely make sense to give the whole system a review, make the process more transparent and predictable and also achieve a higher degree of consistency across files. If that implies tightening the rules in some part to get to a system that is more coherent that would be fine with me,” he added.
But Ferber insists that despite all its flaws, the equivalence procedure is conceptually the simplest outcome. “If we get it more consistent and more predictable, we will have a decent system in place. Devising an entirely different system would either make the entire procedure more complicated or undermine the integrity of the single market - neither of which is an outcome we could want,” he added.
German MEP: UK equivalence will be ‘poor and burdensome’
UK passporting fears realised on Brexit vote