EU commissioner for financial stability, financial services and the capital markets union, Mairead McGuinness, added that the agreement will allow U.K. HM Treasury and the commission to meet on a regular basis to talk about regulatory developments and risks in financial markets. The next meeting is expected this autumn.
The move was welcomed by the financial services and money management industry. And while the agreement provides little detail in terms of how it will help alleviate the challenges that were created by the U.K. exit from the European Union, sources said, it provides a foundation for future cooperation.
Due to Brexit, firms operating out of the U.K. have had to set up new companies in continental Europe to meet regulatory requirements to be able to manage assets for retirement funds. This meant that only firms operating out of Europe could compete for hires and searches. Firms also grappled with staff relocation and splitting funds into U.K. domiciled and EU domiciled vehicles.
"The long-awaited signing of the MoU signals a normalizing of relations between the U.K. and EU, mirroring the type of dialogue the EU has with other major jurisdictions. While it does not create any enhanced bilateral access, it does formally establish the foundations for transparency and future cooperation, and will be welcomed by the industry," Andrew Pilgrim, EY financial services government leader, said in an emailed comment.
Chris Cummings, CEO of the Investment Association, which represents money management firms that manage £10 trillion ($12.71 trillion) in assets, said in a separate emailed comment: "The signing of the MoU on financial services is an important milestone. A close partnership between the U.K. and EU, which recognizes the long-shared history of cooperation, is of mutual benefit and will mean a more resilient and dynamic investment management sector across Europe that benefits citizens and businesses wherever they may be located.
"Now the MoU has been confirmed, all focus must now turn to ensuring the Joint Forum on Regulatory Cooperation delivers a pragmatic, forward-looking dialogue focused on finding common solutions to common challenges. This includes encouraging greater retail participation in European markets, promoting international coherence in sustainability-related disclosures, and identifying how the utilisation of new technology can drive innovation across the sector," he added.
Leonard Ng, co-head of the U.K. and EU financial services regulatory group at law firm Sidley Austin, said in an emailed comment: "While market developments and financial stability issues, and enhanced cooperation and coordination between the U.K. and EU under the MoU are all very helpful, the key point of interest for U.K. asset managers will be the reference in the MoU to 'adoption, suspension and withdrawal of equivalence decisions.'"
An equivalence assessment under Markets in Financial Instruments Directive, for example, will allow U.K. money managers to provide investment services at least to professional clients across the EU, based on a relatively simply registration with EU markets watchdog European Securities and Markets Authority, he said.
It would be the second-best thing to the Markets in Financial Instruments Directive passport, which, of course, is no longer available post-Brexit, he added.