The equivalence regime is “flawed” and not a suitable option for the UK once it leaves the European Union, according to MEP Dr Kay Swinburne.
“I don’t think the UK could ever rely on an equivalence decision,” Swinburne said, speaking at the ISITC Europe’s 2018 annual meeting and conference on Thursday.
“It doesn’t work, we know it doesn’t work, and the Commission admitted it doesn’t work back in 2016,” she added.
Swinburne explained that most equivalence decisions in the run up to Mifid were “opaque, had no process and were completely political”.
Under the existing equivalence regime, the European Commission has the power to withdraw the decision by giving only 30 days notice, and without providing a specific reason.
“It is a flawed system that doesn’t work and is certainly not going to work for the largest member state now moving out,” Swinburne said.
The conservative MEP for Wales, who is also vice‐chair of the ECON Committee on Economic and Monetary Affairs, suggests that the UK should be seeking financial services deal at a much higher level, such as at the level of the free trade agreement.
Nevertheless she considers Brexit to be the catalyst for change and an opportunity to embrace new technology. The status quo cannot change so we must instead,” she said.
“While we are trying to unpick ourselves, everyone else is looking to the future,” she said, explaining that the EU27 has “used Brexit as a catalyst for activity”. For example, the joint notification on a Permanent Structured Cooperation (PESCO), a common defence system, was signed surprisingly quickly by 25 member states towards the end of last year, and the large jurisdictions in the EU now have their own sandbox.
“They are all investing, facilitating and competing with the UK in a way they haven’t thought until Brexit,” Swinburne added.
Brexit has made it essential that we embrace new technology, according to the MEP, who pointed out that the “demonstration of value among the hype in the market is starting to seep through” on a case‐by‐case basis, particularly with regards to distributed ledger technology in the securities lending and insurance space.
Earlier this week, the Association for Financial Markets in Europe (Afme) said that central counterparties should be recognised as equivalent from the date of Brexit to avoid a “potential cliff edge risk”.
This came after the Futures Industry Association (FIA) warned of the disruptive impact of a no‐deal Brexit scenario on the UK and European cleared derivatives industries.
Separately, the FIA said last week that blockchain is a case of “evolution rather than revolution”, a viewpoint echoed by head of ISITC Europe, Nigel Solkhon, speaking ahead of the trade body’s annual meeting.