Brexit and Switzerland–UK relations in the financial sector
Switzerland and the United Kingdom (UK) have enjoyed intensive and multifaceted bilateral relations for many years. Both countries also have leading global financial centres. Because the UK is one of the key markets for the Swiss banks’ export business, it is very important that post-Brexit and after the end of the transition period, relations with the UK not only remain as undisrupted as possible, but are also deepened in a targeted manner.
After intensive negotiations and several postponements of the exit date, the UK government and the EU reached an agreement in October 2019 on the conditions for an exit on 31 January 2020, including a transition period. Shortly before the end of the transition period, an agreement was reached on 24 December 2020 on future trade relations with regard to the movement of goods. However, this agreement does not provide for a new transition period for financial services or for new regulations to replace the “passporting rights” in place until that time for UK financial service providers. Future market access between the EU and the UK in this area remains for the most part unaddressed. Now that the UK is no longer bound by EU law, the Swiss banks believe that an ambitious liberalisation and expansion of mutual market access in the area of banking and securities services must now be pursued bilaterally by Switzerland and the UK.
Far-reaching liberalisation of market access is the sector’s declared objective
- The UK left the EU on 31 January 2020. At the end of the transition period, the bilateral agreements between Switzerland and the EU ceased to apply to the UK. From 1 January 2021, a series of follow-up agreements apply instead, which were reached with the UK as part of the Federal Council’s “Mind the Gap” strategy (including “Mind the Gap Plus”). The majority of the applicable rights and obligations between the two states will thus remain in place.
- There is, however, still considerable potential for deepening cooperation, especially in the financial services industry. The banking sector has declared its objective to be a far-reaching mutual liberalisation of market access after Brexit. This is to be set out in a bespoke agreement and is to be based on mutual recognition of the respective financial market regulations and supervision. In concrete terms this would, among other things, allow Swiss banks to serve the very important “wholesale and sophisticated clients” segments referred to in the joint statement (see below) more easily and in line with their needs.
- On 30 June 2020, the UK Chancellor of the Exchequer Rishi Sunak and Federal Councillor Ueli Maurer signed a joint statement on deepening relations between the two nations in the financial sector. This sets out the aim of liberalising and expanding mutual market access in the areas of banking, asset management, insurance and capital markets (including financial market infrastructure). Elaborating the details of the intentions set out in the statement was also a main topic of the official financial dialogue between the two countries on 8 September 2020.
- The SBA expressly welcomes these important steps towards open markets. A joint sector position paper published by economiesuisse and TheCityUK on 28 April 2020, to which the SBA also actively contributed, outlined a number of issues to be addressed. It is therefore pleasing to note that these have now been incorporated into a joint statement negotiated at the political level. In addition, a round table organised by the SBA on the eve of the 8 September 2020 financial dialogue provided a platform for in-depth exchange between representatives of the authorities and the sector from both countries. The SBA will continue to support intensive dialogue between the authorities involved and the private sector.
- At a virtual meeting on 27 January 2021, the two finance ministers confirmed their resolve to move ahead rapidly with negotiations on a corresponding agreement and agreed to a normalisation in the area of stock exchange equivalence. This step followed the UK recognising the equivalence of Swiss exchanges, after which Switzerland deactivated its measure to protect its stock exchange infrastructure in respect of the UK. As a result, Swiss shares can now once again be traded on exchanges in the UK.
- The aims of the joint statement are ambitious and implementing them will be challenging. The SBA welcomes the determination to expedite the technical work involved, with the goal of concluding an international treaty within the foreseeable future.