Written by Carly Phillips-Jones

On 4 February 2022, the House of Lords European Affairs Committee published a press release announcing the launch of a new inquiry into the UK-EU relationship in financial services. This press release refers to the Trade and Cooperation Agreement (TCA) and the UK and the EU Joint Declaration on Financial Services Regulatory Cooperation, in which the parties committed to agreeing a Memorandum of Understanding to establish structured regulatory cooperation on financial services. However, although technical negotiations on this Memorandum of Understanding concluded in March 2021, it has not yet been formally signed or entered into force.

In addition, since the signing of the TCA, the EU has granted the UK only two equivalence decisions for financial services, both of which have been time limited and one of which has since expired.  Conversely, the UK has granted equivalence to EEA member states in 28 of the 32 areas identified for the equivalence process. 

The press release also notes that now that the UK has left the Single Market, the UK Government is examining potential changes to its regulatory regime for financial services and has commissioned a number of reviews into potential changes and the EU’s regulatory framework in this area is also expected to change over time.

The key issues the Committee is seeking to address in its inquiry include:

  • The impact so far on the UK financial services sector of the UK's departure from the EU single market.
  • The impact of the absence of a functioning framework for UK-EU regulatory co-operation.
  • The future of cross-border UK-EU financial services trade in the absence of equivalence.
  • The impact of regulatory divergence and agreements with third countries on UK-EU financial services trade.

The Committee has also published a webpage on the inquiry, which states that there was an oral evidence session on 8 February 2022 to kick-off the inquiry. The Committee expects to report by May 2022.