On 19 May 2023, the European Union (EU) and the United Kingdom of Great Britain and Northern Ireland (UK) published a Memorandum of Understanding establishing a framework for financial services regulatory cooperation (MoU), which was agreed in advance by the parties.
The primary objectives of the MoU are to maintain financial market stability, promote market integrity and ensure investor and consumer protection. The associated need for regulation resulted from the UK's withdrawal from the EU.
In order to be able to achieve these goals, the Memorandum of Understanding provides for the following:
- A bilateral exchange of views and analysis on regulatory developments and other issues of common interest
- Transparency and appropriate dialogue on the adoption, suspension and withdrawal of equivalence decisions
- A bilateral exchange of views and analysis on market developments and financial stability issues
- Enhanced cooperation and coordination, including in international fora where appropriate
The MoU provides for the establishment of a joint EU-UK Financial Regulatory Forum consisting of members of the EU and the UK to serve as a platform for cooperation in the area of financial services. Through biannual meetings, it will facilitate stocktaking, review joint progress, and work on further regulatory issues related to the financial sector. Where appropriate and in line with existing policy and law, the EU and the UK should seek to identify potential cross-border implementation issues in a timely manner in order to prevent them. In this regard, the Forum may avail itself of representatives of relevant financial regulatory, supervisory and resolution authorities. In its activities, the Forum will focus on the necessary means and regulations in favour of cooperation in financial services, but the body will neither have direct influence on the different jurisdictions nor the ability to take regulatory, supervisory or other legal measures contrary to the opinion of the cooperators. Thus, the Forum's joint discussions will not lead to any direct restrictions.
In detail, the Forum should fulfil the following requirements:
In particular, it should take stock of progress on regulatory measures and plan for the future of cooperation among cooperators, taking into account the above-mentioned objectives. It should also identify potential cross-border implementation issues, highlight potential concerns related to regulatory filings by companies and review the compatibility of cooperators' standards.
In addition, the Forum will aim to support domestic implementation in line with international standards and to promote and facilitate knowledge sharing between the EU and the UK through a common understanding of regulatory frameworks. The Forum is intended to ensure an exchange of views on respective policies, rules and procedures related to reference regulations, such as equivalence, and to engage in a dialogue on autonomous participant decisions to adopt, suspend or revoke equivalence relevant to the respective side. The exchange of views may then lead to a risk analysis with potential economic impacts of the proposed measures or include a common benefit analysis for financial services or financial markets.
The Forum should further host a discussion on macro prudential developments and risks to financial stability and bring the exchange of views on regulatory issues into a bilateral context, taking into account the regulatory interests of supervisors and resolution authorities. In addition, if appropriate and necessary, the Forum will discuss regulatory cooperation issues in a multilateral context, also taking into account the views of EU and UK supervisory and resolution authorities.
Finally, the Forum will be subject to mutual information between the EU and the UK through the exchange of relevant supervisory and enforcement activities. This mutual information will include information on supervision and enforcement and on efforts to prevent and combat money laundering and counterterrorism as they relate to the financial services sector.
Regulatory cooperation, through the work of the Forum, is not intended to limit either jurisdiction in its ability to take regulatory, supervisory or other legal action that it deems appropriate. Consequently, the discussions scheduled will not limit either the EU or the UK in their ability to take their own regulatory, supervisory or other legal actions.
Cooperation through the Forum is intended to provide an ongoing common understanding of relevant regulatory measures, which could become particularly critical in cases where measures have a significant impact on the financial services sector of one jurisdiction or the other.