On 17 May 2023, the European Commission (“Commission”) published a press release announcing that – as a major post-Brexit milestone – it has adopted a draft memorandum of understanding (“MoU”) on regulatory cooperation in financial services with the UK.

This follows the Joint Declaration on Financial Services Regulatory Cooperation between the UK and the EU, which accompanied the Trade and Cooperation Agreement (“TCA”).

The Commission states that the MoU is now subject to final political endorsement by the Council of the EU. Once endorsed, the Commission can sign the MoU on behalf of the EU. Additionally, Andrew Griffith, Economic Secretary to the Treasury, stated that the UK “stands ready” to sign the MoU.

The MoU intends to set out the post-Brexit framework for voluntary regulatory cooperation in financial services between the UK and the EU, outside of the TCA. It will establish the Joint UK-EU Financial Regulatory Forum, which will facilitate dialogue on financial services issues. The MoU aims to improve coordination between the UK and the EU, and replicate the arrangements that the EU already has with other third country jurisdictions, such as the US.

With the above in mind, the MoU appears to be a positive step in improved relations and closer cooperation between the UK and the EU, which is to be welcomed given the difficult negotiations and cooling of relations over the UK-EU border in Northern Ireland in recent times.

However, the MoU does not improve cross border access to financial markets as it does not deal with the access of UK firms to the EU single market, or EU firms’ access to the UK market, nor does it prejudge the adoption of equivalence decisions.

The Commission’s press release is available here.