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European Commission Publishes Communication on Its Equivalence Policy With Non-EU Countries

On July 29, the European Commission (EC) published a communication on equivalence in the area of financial services (Communication). The EC states that, in light of recent policy developments, it is timely to take stock of the EU’s approach to equivalence.

The Communication discusses the purpose and importance of equivalence. The EC states that each new decision is looked at individually and in detail to ensure that the policies of third countries are compatible with those of the EU, and that any equivalence determination is beneficial to, and sustainable for, both parties.EU financial services law includes approximately 40 provisions that allow the EC to adopt equivalence decisions and as of July 29, the EC has adopted more than 280 equivalence decisions for more than 30 countries.

The EC also highlights its recent improvements to the EU equivalence rules. The Communication states that the EC has engaged in a robust dialogue with the European Parliament, the Council of the EU and other interested stakeholders on the necessary improvements to the EU’s approach to determining and maintaining equivalence. Significant changes have been introduced into the equivalence regimes through a number of legislative amendments relating to the proposed:

  • Omnibus Regulation relating to the powers, governance and funding of the European Supervisory Authorities (ESAs), where the role of each ESA in monitoring equivalent third countries is enhanced;

  • regulation amending the European Market Infrastructure Regulation (EMIR) supervisory regime for EU and third-country central counterparties (EMIR 2.2), where a more risk-sensitive and proportionate approach for third-country regimes is being introduced; and

  • Investment Firms Directive, where new assessment criteria, safeguards and reporting obligations for third-country firms are being created.”

In making equivalence assessments, the EC states that it is particularly concerned with identifying risks to the EU financial system. It also notes that equivalence empowerments do not confer a right on third countries for their frameworks to be assessed and that adhering to international standards does not automatically lead to an equivalence decision.

The EC indicates that in the forthcoming months it will work closely with the ESAs on their goals for 2019 and 2020, including:

  • continuing work on equivalence assessments, especially relating to the Benchmarks Regulation;

  • repealing existing decisions where the third-country framework no longer delivers the necessary outcomes (for example, under the Credit Rating Agency (CRA) Regulation—the EC announced that existing CRA equivalence decisions for Argentina, Australia, Brazil, Canada and Singapore have been repealed.);

  • focusing on high-impact areas and third countries (EMIR is mentioned in this regard);

  • focusing on areas where there is an impending review or expiry of an equivalence deadline (the Capital Requirements Regulation is mentioned in this regard); and

  • examining market segments that are undergoing dynamics or structural changes (the Markets in Financial Instruments Regulation (MiFID II) is mentioned in this regard).

The Communication is available here.

©2020 Katten Muchin Rosenman LLP


About this Author

John Ahern, Financial Attorney, London, Katten Law Firm

John Ahern, partner at Katten Muchin Rosenman UK LLP and head of the London Financial Services group, focuses his practice on banking, financial services, UK and European financial markets, and related regulations. His background in private practice and as in-house counsel at a global investment bank provides him with perspective on the unique regulatory issues facing the wholesale and private banking sectors. John advises multilateral trading facilities, broker-dealers and banks on trading, clearing and settlement as well as custody of securities—both physical and...

+44 (0) 20 7770 5253
Carolyn H. Jackson, International Attorney, Katten Muchin law firm

Carolyn Jackson is a partner in Katten Muchin Rosenman UK LLP and is a Registered Foreign Lawyer. She provides US financial regulatory legal advice to a broad range of market participants, including commercial banks, investment banks, investment managers, broker-dealers, electronic trading platforms, clearinghouses, trade associations and over-the-counter derivatives service providers.

Carolyn guides clients in the structuring and offering of complex securities, commodities and derivatives transactions and in complying with US securities and commodities laws and regulations. 

+44 0 20 7776 7625
Nathaniel Lalone, Katten Muchin Law Firm, Financial Institutions Attorney
Senior Associate

Nathaniel Lalone, a partner at Katten Muchin Rosenman UK LLP, has a broad range of experience in the regulation of financial products and financial markets, and frequently provides regulatory and compliance advice to trading venues, clearing houses and buy-side firms active in the over-the-counter (OTC) derivatives, futures and securities markets. He is actively involved in advising clients on the implementation of MiFID 2 and MiFIR in the European Union as well as the international reach of US financial services regulation. He also has significant experience with structuring...

+44 0 20 7776 7629
Neil Robson, private equity fund managers counselor, Katten Law Firm, London

Neil Robson, a regulatory and compliance partner with Katten Muchin Rosenman LLP, focuses his practice on counseling hedge and private equity fund managers and other investment advisers on operational, regulatory and compliance issues. He regularly addresses Financial Conduct Authority (FCA) and EU authorization and compliance under both the EU Alternative Investment Fund Managers Directive (AIFM Directive) and MiFID, cross-border issues in the financial services sector, market abuse, anti-money laundering and regulatory capital requirements, formations and buyouts of...