On 20 September, the House of Commons Treasury Select Committee (the Committee) published data received from Andrew Bailey, the Chief Executive Officer at the Financial Conduct Authority (FCA), on the number of UK firms authorised to perform regulated activities within the financial services sector in other European Economic Area (EEA) member states.
The Committee obtained the information from Mr Bailey following his appearance before them on 20 July. This data request is only a part of the information sought by the Committee in relation to the regulation of financial services.
Authorised firms carrying on financial services activities which are situated in the EEA may exercise their right to perform those activities in other EEA member states under one, or more of the single market directives. This is commonly referred to as “passporting”. An authorised firm may passport its business on a cross border (freedom of services) or branch (freedom of establishment) basis.
The passporting regime therefore removes the need for firms to obtain separate authorisations from other Member States to carry on their business.
The data revealed that 5476 UK authorised firms are currently issued with a passport either by the FCA or the Prudential Regulation Authority (PRA) to conduct financial services activities in other EEA member states (outward passporting).
The figures where much higher for authorised firms outside of the UK conducting financial services in the UK (inward passporting). According to the FCA, 8008 firms are registered with a passport to do this.
Understanding the extent to which UK firms in the financial services industry will be affected by the passporting regime is most important for developing a new arrangement with other EEA member states in light of the result of the UK referendum on 23 June.
Rt Hon. Andrew Tyrie, Chairman of the Committee believes the issue should be “right at the top of the in-trays” of the UK’s lead negotiators if an appropriate arrangement is to be secured for UK authorised firms.