United Kingdom and European Union Reach Consensus on Forming a Joint Financial Regulatory Body
The United Kingdom and the European Union have reached an agreement on a Memorandum of Understanding (MoU) for financial services regulatory cooperation. This development comes as both parties anticipate divergence in their regulatory frameworks for financial services due to proposed changes.
Once signed, the MoU will establish a framework for voluntary regulatory cooperation between the UK and EU, creating the Joint UK-EU Financial Regulatory Forum. This forum will serve as a platform for dialogue and cooperation on financial services issues, similar to what the EU has with the US and Japan.
The Joint UK-EU Financial Regulatory Forum aims to provide a platform for discussions on how to move forward with equivalence determinations, which are political decisions. It's important to note that the forum does not commit either the EU or the UK to any equivalence findings.
The current regulatory landscape emphasizes the need for investment managers operating and investing cross-border in the UK and EU to stay updated on areas of divergence and plan ahead for compliance with applicable EU and UK requirements in parallel.
The negotiations on the draft MoU were led by representatives from both parties, although specific names of the lead negotiators are not stated in the available sources. The EU, to date, has adopted a "line-by-line" approach to assessing the equivalence of the UK's regulatory framework.
The MoU codifies the framework for regulatory cooperation proposed by the Joint Declaration, within which both sides will discuss how to navigate the expected divergence between their regulatory frameworks for financial services over time. The UK is considering tailoring its regulatory approach for financial services to suit its markets.
This agreement marks a significant step towards maintaining a strong and stable relationship between the UK and EU in the realm of financial services, ensuring continued investment and cooperation in the post-Brexit era.
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