UK financial firms no longer allowed to use the European Single Market to offer their services cross border. A new framework for regulatory cooperation is expected to come into effect from March 2021.
Following the agreement reached by EU and UK negotiators on 24 December 2020, the EU-UK Trade and Cooperation Agreement became provisionally applicable on 1 January 2021.
This governs the new relationship between the EU and the UK and sets out preferential arrangements in areas such as trade in goods and in services, digital trade, intellectual property, thematic cooperation and participation in Union programmes.
The Agreement covers financial services in the same way as they are generally covered in the EU’s other Free Trade Agreements with third countries. This means that UK financial services firms intending to do business in the EU are no longer allowed to make use of the European Single Market and offer their services cross-border based on the European Passport. Any decisions relating to equivalences for financial services are also not covered by this Agreement as these are considered to be unilateral decisions of the EU and not subject to negotiation.
By March 2021, both parties aim to agree on a Memorandum of Understanding which is to establish a new framework for regulatory cooperation on financial services.
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