Regulatory dialogue between the EU and the UK is set to resume officially with the adoption by the European Commission of a draft Memorandum of Understanding (MoU) establishing a framework for structured regulatory cooperation between the parties in financial services. The MoU is now subject to final political endorsement by the Council of the EU. In this post and full briefing (attached), we consider the likely practical implications of the MoU and identify some topics that we expect to form the basis of this dialogue. 

A long time coming

The UK’s relationship with the EU in financial services has been a live issue since the Trade and Cooperation Agreement (TCA) was signed in 2020. Alongside the TCA, the UK and the EU published a Joint Declaration on Financial Services Regulatory Cooperation in which they committed to agreeing an MoU establishing the framework for their cooperation.

Technical negotiations on the MoU concluded in March 2021.The Windsor Framework agreement, announced on 27 February 2023, paved the way for a reset in the UK-EU relationship across a range of policy areas, including financial services, bringing the MoU back into renewed focus. In the meantime, a series of other bilateral MoUs between UK regulators and their counterparts in EU institutions and member states has facilitated continued day-to-day regulatory and supervisory cooperation in specific areas of financial regulation.

What does the MoU do?

The MoU establishes the Joint UK-EU Financial Regulatory Forum which brings together the Directorate‑General for Financial Stability, Financial Services and the Capital Markets Union (DG FISMA), HM Treasury, regulators, supervisors, other UK government departments, representatives from EU Member States and relevant experts, as appropriate. The Forum will, in short, “serve as a platform to facilitate structured regulatory cooperation in the area of financial services”. Meetings of the Forum are to be held at least semi-annually. The first session is expected to take place this Autumn.

Main Takeaways

  • The MoU will create an overarching formal framework for the UK and the EU to communicate on financial services matters on a regular basis.
  • It will provide an opportunity for closer strategic cooperation on these matters. This might include mapping out the consequences of (further) divergence between the two regimes.
  • There are no immediate implications for market access. The longer-term impact of the MoU on any potential equivalence decisions is uncertain. 
  • The text of the MoU underscores the importance of preserving the regulatory autonomy of both parties, though this should not ultimately hinder the development of a collaborative approach to managing cross-border risks.

For our full briefing, please find the attached PDF.