The EU is an important trading partner in financial services sector, making up 37% of total UK financial services exports in 2019. While an EU member state, the UK enjoyed market access in financial services to the rest of the EU through a system known as “passporting”. The UK-EU Trade and Cooperation Agreement (TCA) contained few provisions for trade in financial services and the access falls far short of what businesses had as part of the European single market.

The TCA was accompanied by a number of Joint Declarations, including on “Financial Services Regulatory Cooperation”. Under this Joint Declaration, the UK and EU agree to “establish structured regulatory cooperation on financial services” which will allow for:

• bilateral exchanges of views and analysis relating to regulatory initiatives and other issues of interest;
• transparency and appropriate dialogue in the process of adoption, suspension and withdrawal of equivalence decisions; and
• enhanced cooperation and coordination including in international bodies as appropriate.

The UK and EU also committed to agreeing a Memorandum of Understanding (MoU) to establish the framework for cooperation on the points above.

In 2022, the House of Lords European Affairs Committee examined the relationship between the UK and EU in financial services. In its report, the committee said the UK’s financial services sector remained strong and that some challenges presented by Brexit had proven to be less significant than predicted. However, it warned the government against complacency, saying that ministers must ensure their future approach delivered for the sector and the wider UK economy.

A draft Memorandum of Understanding establishing a framework for financial services regulatory cooperation between the EU and the UK, was published on 19 May 2023. The two sides agreed to “jointly endeavour to pursue a robust and ambitious bilateral regulatory cooperation in the area of financial services”. They also agreed to establish the Joint EU-UK Financial Regulatory Forum which should serve as a platform to facilitate structured regulatory cooperation in the area of financial services. In particular, the Forum is intended to take stock of progress and to undertake forward planning of regulatory cooperation with general operational objectives to: improve transparency; reduce uncertainty; identify potential cross-border implementation issues, including concerns linked to potential regulatory arbitrage by firms; as appropriate, consider working towards compatibility of each other’s standards; when relevant, promote domestic implementation consistent with international standards; share knowledge to facilitate a common understanding of the EU and UK’s regulatory frameworks; and exchange information and views on other issues of common interest within the scope of these regulatory cooperation arrangements.