The BBA has recently published a series of short Brexit articles. So far there are four, with more planned where further significant topics are identified. These are useful for financial services firms as they provide a Brexit-related assessment specifically through the lens of financial services and banking.


The topics in the series of "Brexit Quick Briefs" which have been covered so far are the following and we summarise them below:

Staying in or Leaving the EU single market

The initial briefing considers access to the EU, how this might work for UK firms, and whether the UK will seek continued inclusion in the single market via EEA membership or opt to become a "third country". The choice has important implications for financial services firms as both options have advantages and disadvantages. Many are concerned about the UK having third country status because of the potential to restrict trade of UK firms in banking services in a highly disruptive way. Membership of the EEA would preserve many of the current operational freedoms for UK firms but at a potentially high cost because the UK would not able influence the rules that it would otherwise be required to implement and follow. By way of balance, it is suggested that some concerns could be offset by a range of measures, such as maintenance of the small number of special frameworks for third countries that might be activated for the UK. But these currently operate in a limited number of areas such as investment services, market infrastructure and data transfers. That said, there is nothing to restrict the UK and EU from negotiating a more comprehensive and bespoke third country access framework, although this is unprecedented in the EU. It would also require a high degree of political co-operation and goodwill from both sides to achieve and maintain such a framework.

An orderly exit from the EU

In the second briefing, the BBA focus on the process for leaving the EU and highlight the key questions about the Article 50 process that remain unresolved. Market access to the EU for financial services both during any transitional period and beyond are considered. One of the key points in this briefing is that any discussions about the Article 50 process should happen in parallel with discussions about transition and future market access. In other words, the UK should look to negotiate a trade agreement with the EU alongside the withdrawal from the EU agreement.

What is "passporting" and why does it matter?

Passporting is a hot topic in the context of Brexit discussions, and remains a key concern for many UK (and arguably EU) financial service providers. In this briefing, the BBA summarise the nine different passports that banks and financial services providers currently rely on in order to provide their products and services across the EU. These include passports to undertake lending and other core banking activities, investment services and asset management, as well as credit cards and e-money. The briefing sets out why passporting matters, how it works (using some helpful diagrams) and asks whether banks outside the EU could obtain passports. The article sets out the implications for UK banks if the UK leaves the EU (and does not become a member of the EEA) but balances this with some consideration of what alternatives there are to passporting rights.

What is equivalence and how does it work?

The latest in the series provides an overview of equivalence, which is a potentially important concept for the provision of post-Brexit financial services in the EU. A determination of equivalence can be beneficial for foreign banks and for an EU bank dealing with a foreign bank. At a very high level, if a foreign bank's home country regulatory framework is deemed "equivalent" by the EU, this means those foreign providers registered in that country can have access to EU markets - however, in the context of access, the EU equivalence regime should not be viewed as a direct substitute for passporting rights – it operates in fewer areas of financial services and is inherently less secure for those outside the EU relying on it, because a foreign country's equivalence status can be reviewed and removed by the EU.

A number of key points about equivalence are made:

  • equivalence is not based on exact transposition of EU laws by a foreign country – it is based on a close comparison of the intent and outcomes of the EU system with the other country's system;
  • EU market access rights are narrower, more onerous and more unstable – and do not provide non EU firms with certainty; and
  • securing an equivalence determination from the EU is likely to be time consuming, complicated and could take years to conclude, as measuring and determining the thresholds to decide whether a foreign regime is EU equivalent, is likely to be a very complex exercise.

We hope the summary helps and we look forward to providing further commentary.

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