Call for Evidence

The House of Lords EU Services Sub-Committee, chaired by Baroness Donaghy, is holding an inquiry into financial services after Brexit. Its predecessor, the EU Financial Affairs Sub-Committee, launched the inquiry in early 2020 and in March published its findings in a long letter to the Chancellor. The Committee is keen to hear evidence on the priorities for the future UK-EU relationship in the financial services sector and the potential consequences if no free trade agreement is reached.

The Committee invites interested individuals and organisations to submit evidence to this ongoing inquiry. The Committee is particularly keen to hear from practitioners and small businesses across the UK, including the regions and devolved nations. Written evidence is sought by 20 November 2020 at the latest, although the Committee would welcome submissions in advance of the deadline. Public hearings are expected to take place in October and November and the Committee intends to write to the Government with its findings before the end of the year.

Diversity comes in many forms. Hearing a range of different perspectives means that committees are better informed and can more effectively scrutinise public policy and legislation. Committees can undertake their role most effectively when they hear from a wide range of individuals, sectors or groups in society affected by a particular policy or piece of legislation. We encourage anyone with experience of or expertise in an area under investigation by a select committee to share their views with the committee, with the full knowledge that their views have value and are welcome.

Background

The Government is currently negotiating the terms of the UK’s future trading relationship with the EU. Financial services—a broad sector that includes banking, insurance, pensions and investment, among other areas—will be affected by the nature of any agreement or the absence of one.

As we set out in our March letter, the question of equivalence, which is separate from the ongoing negotiations, is of pressing importance to the sector. If the EU grants a positive equivalence decision to a certain sector or industry in a third country, companies in that area can access the EU market on the same terms as EU companies. EU financial services law includes around 40 areas for equivalence decisions. The EU has granted an 18-month extension of equivalence for UK central counterparties but has not yet made a decision in the other areas.

The UK and EU have so far failed to agree frameworks and timescales for the orderly withdrawal of equivalence, should either side in future deem the other to no longer be eligible for equivalence in a certain area, or for how bilateral regulatory dialogue more generally should be structured.

The UK Government has started to identify and publicise its post-transition priorities for the sector and the areas in which it is looking for regulatory divergence from the EU, while stressing that it seeks “similar outcomes”. Under the proposals, Government and Parliament would set the overall direction of financial services policy but delegate greater powers to regulators for the day-to-day supervision of the sector.

The inquiry

The Committee seeks evidence on the following questions in particular:

1. Is the UK financial services sector well prepared for the end of the Brexit transition period? What are the main areas where arrangements are not yet in place? Could a lack of certainty prompt companies to move assets and personnel to the EU? How have these preparations shaped the UK financial services sector?
2. How important is a UK-EU comprehensive trade agreement for the UK’s financial services sector? Which specific areas should be a priority?
3. What would be the implications of a ‘no agreement’ scenario for financial services firms? What more can be done to help the financial services sector prepare for a ‘no agreement’ scenario?
4. What would be the consequences if the EU does not grant the UK positive equivalence determinations? In what areas are equivalence decisions particularly important?
5. How important is it that any positive equivalence determinations are underpinned by an agreed framework for the orderly withdrawal of equivalence?
6. How should future UK-EU regulatory dialogue be structured? How should divergence be managed?
7. The Government has now published the Financial Services Bill and Financial Services Future Regulatory Framework Review consultation paper. What are the strengths and weaknesses of these proposals?
8. What impact could a greater delegation of powers to financial regulators have? What oversight should there be of these bodies?
9. How could the absence of a positive data adequacy decision from the EU impact the sector?

You do not need to answer all of these questions.