Head-to-head: the merits of equivalence

Author: | Published: 24 Apr 2017

Q: Is equivalence a backdoor route for UK firms to maintain access to EU markets?


Jonathan Herbst, partner and global head of financial services at Norton Rose Fulbright

It is very easy to answer this question by saying yes, no or maybe.

Let's start with no.

The problems with regulatory equivalence in its current form have been widely reported. First, that equivalence is a patchwork system, not all pieces of EU financial services legislation contain equivalence provisions that contain passport-lite access to the EU. Notably, from a banking perspective, this includes the Capital Requirements Directive IV and is therefore a significant problem for UK banks. For non-EU investment firms, the equivalence provisions that appear in the Markets in Financial Instruments Regulation are limited in the sense that they apply only when providing business to per se professional clients and eligible counterparties. There is also the opacity of the European...