On 19 May 2023, the European Union (EU) and the United Kingdom (UK) published the long-awaited text of the Memorandum of Understanding (MoU), establishing a structured framework for financial services regulatory cooperation in a post-Brexit environment.
This development follows on from the Joint Declaration on Financial Services Regulatory Cooperation between the EU and the UK (which accompanied the Trade and Cooperation Agreement signed in December 2020) (Joint Declaration), and which progress on the proposed MoU had stalled amid the long-running stand-off between both sides over Northern Ireland trading arrangements (see our previous article here). The MoU’s publication may be seen as a first step towards a more constructive financial services relationship between the EU and the UK in light of The Windsor Framework, which Mairead McGuinness, Commissioner for Financial Services, Financial Stability and Capital Markets Union, described as allowing both sides to
open a new chapter in our partnership based on a spirit of mutual trust and cooperation.
The main objectives of the MoU are to preserve financial stability, promote market integrity, and protect investors and consumers. To achieve these aims, the MoU provides for:
- Bilateral exchange of views and analysis relating to regulatory and market developments, financial stability issues, and other issues of common interest.
- Transparency and appropriate dialogue on adopting, suspending, and withdrawing equivalence decisions.
- Enhanced cooperation and coordination, including in international bodies (as appropriate).
The MoU formally established the Joint EU-UK Financial Regulatory Forum (Joint Forum), which serves as the platform to facilitate structured regulatory cooperation under the Joint Declaration and the MoU. Cooperation through the Joint Forum (which will meet at least bi-annually and whenever the EU and UK consider necessary) is primarily intended to:
- Share knowledge to facilitate a common understanding of the EU and UK’s regulatory frameworks.
- Ensure an exchange of views on respective policies, rules and procedures related to reference regulations such as equivalence.
- Share information on regulatory development to allow for the identification of potential cross-border implementation issues, including concerns linked to potential regulatory arbitrage.
- Consider working towards the compatibility of each other’s standards, as appropriate.
- Promote domestic implementation consistent with international standards when relevant.
- Identify risks to financial stability.
- Facilitate the exchange of information on providing effective supervision and enforcing rules for implementing internationally agreed standards.
The Joint Forum will not restrict the EU or UK’s ability to independently take regulatory, supervisory or other legal measures that either deems appropriate. Notably, the MoU does not deal with the access of UK-based firms to the Single Market or EU firms’ access to the UK market, nor does it prejudge the adoption of equivalence decisions.
The MoU is currently subject to final political endorsement by the Council of Europe before the European Commission can sign it on behalf of the EU. Once signed on the EU side, the UK has confirmed its intention to sign shortly after that. It needs to be clarified when exactly we can expect the Joint Forum’s first meeting to occur. However, there appears to be some positive momentum building towards that long-awaited outcome.
If you have any questions on this topic, please contact any member of our Insurance Team or your usual William Fry contact.
Contributed by Catherine Carrigy & Jack Stokes
