Hard Brexit for financial services

Since 1 January 2021, economic relations between the EU and the UK have been governed by the Trade and Cooperation Agreement ("TCA") agreed on 24 December 2020 between the EU and the UK as a third country (see link here). Since then, the EU and the UK have formed two distinct regulatory and legal spaces and the UK’s relationship with the EU is now based on international law.

The TCA’s primary focus is on trade in goods and it contains very little on financial services. Since 1 January 2021, UK financial service providers have no longer been able to rely on passporting rights to access the EU market and vice versa. This implies a de facto "hard Brexit" for financial services.

Please read more on the TCA and its impact in our Newsflash here.

At the EU's request, the provisional application of the TCA, initially foreseen until 28 February 2021, has been extended until 30 April 2021, allowing for more time to arrange for EU ratification.

Regarding financial services, a Memorandum of Understanding ("MOU") was expected to be concluded between the EU and the UK by March 2021 in order to establish the framework for cooperation on equivalence decisions. In a press release of 26 March 2021, the UK Government confirmed that technical discussions on the MOU have been concluded but that formal steps need to be taken on both sides before the MOU can be signed. The MOU will create a platform for voluntary regulatory cooperation in financial services between both parties.