How does Brexit change the UK’s access to the EU financial market?
Companies within the EU that provide cross-border financial services requiring authorisation can use the EU passport. The passport enables companies that are established in a member state of the European Economic Area (EEA), and that have the necessary authorisations, to operate in all other EEA states. In accordance with the Withdrawal Agreement, the EU passport is no longer available to UK firms now that the transition period has ended. Rather, they are now subject to the rules that apply to non-EU member states (third countries).
The extent to which UK firms are still able to provide cross-border financial services in the EU depends on whether the EU grants them access to EU financial markets on the basis of sector-specific rules for third countries.
Therefore, all affected stakeholders – companies and customers alike – had to prepare for a situation where UK firms no longer have passporting rights to conduct business on EU financial markets after the end of the transition period.
The Trade and Cooperation Agreement covers financial services in the same way as they are generally covered in the EU’s other free trade agreements with third countries. In particular, both parties have committed to keeping their markets open for operators from the other party seeking to supply services through establishment. The parties have also committed to ensuring that internationally agreed standards in the financial services sector are implemented and applied in their territories. Both parties preserve their right to adopt or maintain measures for prudential reasons (“prudential carve-out”), including in order to preserve financial stability and the integrity of financial markets. According to a Joint Declaration complementing the Trade and Cooperation Agreement, the two parties will establish “structured regulatory cooperation” on financial services, to be agreed in a Memorandum of Understanding that will be concluded by March 2021.