Financial market regulation

Within the EEA, banks, securities services providers, insurance companies and investment fund managers are regulated by the supervisory authority responsible for their state of registered office.

Once a firm is authorised in one Member State, it can offer its products and services in other countries throughout the entire EEA and operate in other Member States through branch offices ("EU passport").

So far, EU financial market directives do not provide any similar facility for companies from third countries to acquire an EU-wide licence (some narrowly-defined exceptions do apply to certain fund products and their fund managers).

Financial service providers from third countries may obtain access to the market in the EU by way of equivalence decisions if the regulatory or supervisory regime of a third country is equivalent to the corresponding EU regime.

During the transition period, UK institutions may continue to offer their services in the EAA using their EU passport and conversely EEA institutions may operate in the UK.

The withdrawal agreement does not contain any provisions on financial services. Also the regulations in the Trade and Cooperation Agreement apply only to a limited extent to financial services. From 1 January 2021 UK institutions will therefore no longer be able to operate in EEA states on the basis of the EU passport.

As a result, companies must generally maintain their own institution within the EEA (through a branch office licensed as an institution, or via a subsidiary) in order to continue selling their products and services within the EEA (some narrowly-defined exceptions do apply to (alternative) investment funds).

Other rules can be made on the basis of equivalence decisions. Alongside the Trade and Cooperation Agreement the EU and UK published a Joint Declaration on Financial Services Regulatory Cooperation. Thereafter they intend to agree a Memorandum of Understanding by March 2021 which should establish a cooperation framework on financial services and equivalence-related processes.