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 applied instead, which were reached with the UK as part of the Federal Council’s “Mind the Gap” strategy. The majority of the applicable rights and obligations between the two states thus remained in place.
- However, Swiss banks are confronted with complex and partly unclear UK regulation and corresponding risks when doing cross-border business with private clients in the UK, especially with regard to UK-based individual clients. For this reason, Swiss banks are aiming for an ambitious expansion of mutual market access in the area of banking and investment services. This should enable Swiss banks to serve the interested UK customer segments more easily and in line with their needs in the future. For Swiss banks, the main focus is on improvements and simplifications in the segment of high-net-worth individuals, as these account for a large part of the cross-border banking business.
- 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. A joint industry position paper by economiesuisse and TheCityUK, which was published on 28 April 2020 and in which the SBA had participated, had formulated corresponding substantiated concerns, which were largely adopted. Since then, the two governments have been working on a Mutual Recognition Agreement (MRA). The negotiations are aimed at liberalizing and expanding mutual market access in the areas of banking and investment services, asset management, insurance and capital markets (including financial market infrastructure). The basis of this agreement is to be the mutual recognition of the respective financial market regulation and supervision. In February 2022, both sides reconfirmed their commitment after a ministerial meeting and the objective remains to conclude the agreement by the end of 2022.
- The aims of the Joint Statement are ambitious and implementing them will be challenging. The SBA welcomes the swift proceeding regarding the technical work involved, with the goal of concluding an international treaty within the foreseeable future.