It has been four months since the Brexit trade deal came into effect between the United Kingdom and the European Union. The deal, in common with other free trade agreements, does very little to support the export of financial services from the U.K. into the single market. As a result, spring has seen financial services firms, including those in financial technology adjusting to different trading relations with the EU, while also managing the ongoing COVID-19 restrictions.
Most notably, U.K. financial services have lost their automatic rights to service EU clients from their U.K. base, using the so-called passporting rights that U.K. firms had during the time as a member state. Passporting has been replaced by equivalence decisions. However, this is not a fair replacement. Equivalence is a unilateral decision granted by the EU in areas of finance, where it recognizes the U.K.’s regulatory framework to be equivalent to its own. These decisions can be withdrawn with 30 days’ notice and do not cover the whole financial services sector. For example, retail bank lending and depositing are not subject to equivalence decisions.
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