New report underlines need for bespoke UK-EU deal

A new report, released today by the International Regulatory Strategy Group (IRSG) [1] in collaboration with Hogan Lovells, concludes that the focus of the Brexit negotiations should be on designing and delivering a bespoke UK-EU deal rather than reforming or adapting existing frameworks. This bespoke deal should be based on mutual recognition and regulatory cooperation and allow for mutual market access, delivering the same, or comparable, levels of access rights to those currently available.

The EU’s third country regimes and alternatives to passporting,’ is a detailed analysis looking at the EU’s existing third country regime (TCRs) [2] and equivalence provisions as a solution for allowing the whole UK-based financial services industry cross-border access to EU-markets following Brexit. It shows that they are not sufficiently robust and are unsustainable. It also underlines how existing alternatives to passporting and TCRs are either limited or significantly less efficient than current arrangements. The report therefore concludes that the Government should pursue a bespoke approach to securing access.

The report makes clear the need for transitional arrangements to be agreed as quickly as possible to ensure the industry can continue to provide services to customers post-Brexit.

Mark Hoban, Chair of the IRSG, and former Treasury Minister, said: “The UK is the leading international financial centre and there are clear benefits to the EU in ensuring the UK’s ability to act as a strong financial hub for Europe. The UK Government must negotiate an ambitious deal that maintains the highest degree of access for the UK to the EU and vice versa.

The analysis is clear: a new UK-EU relationship based on existing third country regimes and equivalence is not a viable option for the whole industry. The TCRs are limited in coverage and uncertain in their availability, and too unpredictable. A bespoke solution WITH reasonable safeguards is the only way to prevent the fragmentation of financial markets and ensure continuity of service for firms and customers in the UK and across the EU.”

Rachel Kent, Global Head of Financial Institutions Sector, Hogan Lovells, said: “The UK automatically becomes a third country on Brexit so, unless an alternative deal is agreed, the UK would then be relying on securing access under the EU's third country regimes to maintain its access to the EU for financial services. This analysis gives insights into the processes involved and identifies the gaps in, and limitations of, the TCR regime, so as to inform and help shape policymakers' priorities. A bespoke arrangement establishing mutual rights of access would benefit both the EU and the UK by securing continuity for financial services and this report outlines the steps to achieve that, if the political will can be secured.”

A summary of the report’s findings:
  • Given their limited coverage, uncertainty of availability and the lack of key safeguards associated with them, the EU's current third country regimes do not provide a long-term sustainable solution for the UK-based industry as a whole to access EU markets post-Brexit.
  • The analysis reveals that current alternatives to passporting and TCRs for UK-based financial services firms are subject to limitations or are significantly less efficient than existing arrangements. A mutual access arrangement could be put in place as part of the bespoke agreement with mutual market access being granted on the basis that the respective regimes are recognised as being broadly consistent, but the UK should avoid trying to have access rights tied to the EU's existing concept of equivalence. Access rights under a mutual access arrangement should also seek to cover as broad a scope of activities as are currently covered under the passporting regime.
  • Arrangements should include robust processes and procedures that provide legal certainty.
  • The transition into the new arrangements should allow for continuous access to products and services for firms and customers. The arrangement should also be designed to preserve continuity of operation for UK-based entities regulated at an EU level.
  • When the criteria for mutual access have been agreed, the UK and the EU should seek immediate mutual recognition that the other party meets the relevant criteria based on their regimes matching as at Brexit.
  •  Regulatory cooperation and collaboration between respective regulatory authorities will be essential.
  • A mutual access arrangement could be used by the UK as the basis for its relationships with other third countries ongoing. It may also offer the EU a new way of dealing with other third countries.

Notes to editors:
[1] The International Regulatory Strategy Group (IRSG) is co-sponsored by TheCityUK and the City of London Corporation. It is a practitioner-led body comprising of leading UK-based figures from the financial and related professional services industry from within TheCityUK membership. It is chaired by former treasury minister, Mark Hoban, who is also a member of TheCityUK Board.
[2] Third Country Regimes (TCRs) definition: The TCRs are provisions of existing EU law that provide certain rights and protections, subject to conditions, to countries outside the EU/EEA (third countries) and to financial services firms from those countries (third country firms). These rights fall short of passporting but include the ability to conduct certain regulated activities in the EU. Usually, where a TCR is available, it is on the condition that the EU authorities must first make a determination that the legal and regulatory system in the relevant third country is equivalent to that in the EU.

To arrange an interview or for further information, please contact:
Jack Neill-Hall / 020 3696 0114 or 07809 334 681 /
Jennifer Green / 020 3696 0115 or 07899 102 889 /
Vanessa Montero / 020 7296 5070 or 07834 309586 /
Charlotte Sansom / 020 7296 2132 /

TheCityUK represents the UK-based financial and related professional services industry. We lobby on its behalf, producing evidence of its importance to the wider national economy. At home in the UK, in the EU and internationally, we seek to influence policy to drive competitiveness, creating jobs and lasting economic growth –

Hogan Lovells
Hogan Lovells is a leading global law firm with more than 2,500 lawyers across nearly 50 offices. We understand and work together with multinationals to solve the toughest legal issues in major industries and commercial centres around the world. The firm's Constitutional Change Taskforce (CCT) brings together senior thought leaders from across Hogan Lovells to analyse, anticipate, and help clients to navigate Brexit. Further information can be found at:

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