On 27 March 2020, the House of Lords EU Financial Affairs Sub-Committee published a letter from its Chair, Lord Sharkey, to the Chancellor of the Exchequer, Rt Hon. Rishi Sunak MP, emphasising the importance of the UK remaining actively engaged in shaping the future relationship with the EU in financial services.
In the letter, Lord Sharkey calls on the Government to establish a structured dialogue between the UK and the EU to support cross-border financial services and manage any future divergence. The key message from Lord Sharkey is as follows:
“While the Government is quite rightly currently focussing on the coronavirus pandemic, at some point it will need to return to considering the future of the UK’s financial services sector and negotiating its relationship with the EU.
“When it does, it should pay particular attention to how it will work with the EU to support cross-border financial services and manage any future divergence.”
The letter also sets out the following key points and recommendations which were reached by the Committee during its review of financial services after Brexit:
- while the UK is currently fully aligned with the EU, there is a risk that the EU’s equivalence decisions will be politicised and could be withdrawn at very short notice. There should be regular and structured dialogue to provide a forum for discussion and resolve any possible disagreements;
- the Government should delegate more powers to the financial regulators after Brexit, to give the UK’s regulatory regime more flexibility and increase its ability to respond to changes. This will require increased parliamentary oversight of the financial regulators’ activities; and
- the UK may wish to make some targeted adjustments to ensure that the regulatory regime is fit for purpose. The UK should take a leadership role in promoting international cooperation in financial services after Brexit by promoting global standards.
The letter also includes a longer annex highlighting key findings from the inquiry from various government, regulatory and industry sources. While much of this will be familiar territory to market participants that have remained engaged in the discussion on this area, the annex is a useful round-up of key perspectives on equivalence and the shape of the future UK-EU relationship.