Relations between Switzerland and the UK
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 reciprocal market access in the area of banking and securities services should 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 came into force instead, which were reached with the UK as part of the Federal Council’s “Mind the Gap” strategy. The bulk of the applicable rights and obligations between the two states thus remained in place.
- However, Swiss banks engaging in cross-border business with private clients in the UK face complex and in some cases unclear UK rules and concomitant risks, especially with regard to individual clients domiciled in the UK. For this reason, Swiss banks are calling for an ambitious expansion of reciprocal market access for banking and securities services, to allow them to serve interested UK client segments more easily and in line with their needs. First and foremost, they want to see improvements and simplifications with regard to the high-net-worth individuals segment, as these account for a large proportion of cross-border banking business.
- On 30 June 2020, the then UK Chancellor of the Exchequer Rishi Sunak and former Federal Councillor Ueli Maurer signed a joint statement on deepening relations between the two nations in the financial sector. 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, most of which have been taken up. Since then, the two governments have been working on a mutual recognition agreement (MRA). The negotiations are aimed at liberalising and expanding reciprocal market access in the areas of banking and securities services, asset management, insurance and capital markets (including financial market infrastructure). The agreement is to be based on mutual recognition of the respective financial market regulations and supervision. After a meeting at ministerial level in February 2022, the two sides reaffirmed their commitment, and the goal remains to conclude the agreement by summer 2023.
- 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.