The UK's departure from the EU will fundamentally alter the financial services ecosystem that in 2018 contributed £132 billion to the UK economy and 6.9 per cent of total economic output. To scope out the issues and to better understand the options facing the industry, Clifford Chance and UK Finance held a workshop on ?Brexit: third country regimes and equivalence? on 11 February 2020. The workshop was attended by a range of UK Finance members, including financial service firms headquartered in the UK, US, EU and other jurisdictions. This demonstrates that, despite the political commitments to reach a new deal by the end of 2020, the issues relating to equivalence and future market access remain a key factor for the financial services industry with regards to planning for the future.

The workshop covered topics such as free trade agreements, UK and EU negotiating positions with respect to financial services, and the processes involved in administrating equivalence decisions. During the presentation, the group discussed how equivalence can be used to support the provision of specific additional services from third-country firms rather than as a primary basis for doing business in the EU, as the areas it covers are much more limited than passporting and can be withdrawn at short notice. For example, equivalence would not facilitate cross-border contracting rights for spot FX, deposit-taking or e-money. UK and EU authorities are aiming to complete their respective equivalence assessments by June 2020, after which the industry should have a better understanding of the tools available to them and what, if any, further steps they will need to take to prepare for January 2021.

In addition to a more limited regime under equivalence, the landscape is further complicated by ongoing EU legislation. This includes the Investment Firm Review, which may introduce changes on how third-country firms are assessed and would impact UK-based firms. Questions included whether a commitment to an equivalence decision could be strengthened within a free trade agreement, the significance of MiFID II Article 39 (which sets out the details on the establishment of branches for third-country firms) and the UK's approach to equivalence through its onshoring programme. The issues covered and questions raised demonstrate the evolving legal and regulatory landscape that financial service firms will have to navigate as the transition period ends and we head into 2021.

UK Finance will continue to work with and support our members, other industry groups, the UK government and regulators as we approach key regulatory and legal milestones this year, whilst also continuing to provide updates, content and events to the financial services industry.