AFME Urges Progress In Brexit Negotiations
With less than six months remaining before the end of the transition period, the Association for Financial Markets in Europe (AFME) urges the EU and UK to make progress on the negotiations and put in place equivalence decisions and the necessary arrangements to ensure a stable long-term relationship for financial services and minimise potential disruption.
In a paper published today (6 July) setting out priorities for the future EU-UK relationship, AFME highlights that continuing uncertainty on Brexit, combined with the adverse macroeconomic situation arising from COVID-19, has the potential to aggravate existing risks at the end of the transition period and significantly increase disruption to clients and markets.
#Brexit: AFME published today a paper setting out priorities for the future EU-UK relationship in financial services. We address equivalence determinations and other regulatory challenges. https://t.co/0s8b9y5sPs
— Pablo Portugal (@PabloPortugal4) July 6, 2020
AFME is calling on the EU and UK to:
- ensure that equivalence determinations are in place well in advance of the end of the transition period;
- establish arrangements for close supervisory cooperation to ensure effective and efficient oversight of firms and cross-border activities; and
- establish a formalised framework for regulatory cooperation to build trust and ensure as much transparency and certainty as possible over the processes for the assessment and withdrawal of equivalence.
Michael Cole-Fontayn, AFME Chairman said:
“We hope the EU and the UK will establish a successful long-term relationship for financial services, but time is running out. That’s why we are urging the EU and UK to put in place equivalence determinations and address regulatory challenges as soon as possible to minimise disruption to markets and businesses which will need time to adapt their processes and technology. We hope that the foundations can be laid for a cooperative and stable long-term relationship, minimising fragmentation, including formal arrangements for supervisory and regulatory cooperation to build trust and ensure as much transparency and certainty as possible over equivalence processes.
“This is even more important in the current economic environment, where firms and their clients are facing the ongoing effects of COVID-19. While European wholesale banks have undertaken very extensive preparations to ensure that they can continue to serve their clients in any scenario, businesses across Europe are facing the consequences of the COVID-19 pandemic. This combination has the potential to aggravate risks at the end of the transition period. A clear position from the EU and the UK will ensure that businesses and markets can have certainty and time to adapt to minimise potential disruption for clients and markets.”
The paper also highlights outstanding regulatory challenges for financial services that should be addressed ahead of the end of the transition period to minimise disruption to markets and clients. These include ensuring continued access for EU firms to UK CCPs, addressing the implications of the MiFID share trading obligation (STO) and the derivatives trading obligation (DTO), and ensuring the continued servicing of existing clients and contracts.
The paper can be downloaded from the AFME website
The review is an opportunity to recalibrate MiFID II regulations post-Brexit.
Trade associations have asked for an extension of the temporary equivalence decision for UK CCPs.
Temporary equivalence is set to expire on June 30 2022.
IRS trading volumes have fragmented without an equivalence agreement.
Most EU member states had an increase in bankers earning more than €1m.