UK EU Memorandum of Understanding. Talks About Equivalence Yet? 

*** UK EU Memorandum of Understanding Was Actually Signed on June 27th 2023

UK EU Memorandum of Understanding. Talks About Equivalence Yet? 

The month of May saw significant progress for the future relationship between the UK and the European Union post Brexit. Talks on cooperation on financial services, stalled since 2021, resumed and gathered momentum with the formal adoption of a draft of the long awaited UK EU Memorandum of Understanding 

Whilst we wait for political endorsement to come from EU member states, this time the environment seems to be more conducive to a successful resolution of the issue of cooperation on financial services between the parties. Many would agree that this represents a good first step in the right direction. Yet a little too early to talk about equivalence still.

 Get in touchhere with your contacts at Veneziano & Partners to see how we can help with the UK EU Memorandum of Understanding. 

Windsor Treaty 

The post-Brexit saga has seen already various moves by both parties to acquire or retain leverage in political negotiations. It is in this light that the trade and cooperation agreement between the UK and EU left uncovered financial services. A real headache for the UK being traditionally an exporter of these services across the block. Yet a move that yielded some significant upside for Europe in the context of broader post-Brexit negotiations. The UK also attempted to gain as much leverage as possible. One of the examples is the introduction of its own inward equivalence assessment as part of the forthcoming UK Overseas Fund Regime 

What seems to have solved the impasse now and paved the road again to a more constructive discussion between the UK and EU on financial services – and possibly equivalence for the UK down the line – is the so-called Windsor Treaty. A recent agreement between the UK and EU mainly relating to goods crossing the Irish Sea from Great Britain to Northern Ireland. A much better arrangement and framework compared to the Northern Ireland protocol, which was the reason for abandoning the discussion on future broader cooperation on financial services back in 2021 by Brussels.   

 UK EU Memorandum of Understanding – What Does it Help with? 

The UK EU Memorandum of Understanding talks about pursuing a robust and ambitious bilateral regulatory cooperation around financial services, based on a set of arrangements. The basis for cooperation on the topic of financial services remains the shared aim of preserving financial stability, market integrity and protection of investors and consumers. The arrangements will provide for bilateral exchanges of views and analysis on issues of common interest, including market developments and related market stability issues. Particular emphasis seems to have been placed on issues related to crossborder implementation of regulation from both sides. On this point, where possible and in a manner consistent with applicable policy and good administrative practices, both parties commit to share with each other information on development in the respective regulations, where that is necessary to allow for timely identification of potential issues on crossborder implementation.  

What does that mean in practice? More cooperation between the parties and sharing of information to ensure that each other’s standards on financial services regulation remain compatible as well as promote alignment of domestic regulation towards international standards. More transparency and more certainty for the respective markets.  

Whilst not a pronunciation on equivalence per se, the UK EU Memorandum of Understanding does contain some references to equivalence. One clear and open. As part of the base arrangements, transparency and dialogue between the parties in all the equivalence related processes of adoption, suspension and withdrawals is required.   

Less open references to equivalence can also be found throughout the UK EU Memorandum of Understanding. Those are the most interesting ones. The aims of the Forum established between the UK and the EU on financial regulation are a good example. In essence, working towards the compatibility of each other’s standards as well as alignment towards international standards of respective local regulations bodes very well for future equivalence. Equivalence tends to find a better environment when the overall aims and principles are aligned rather than the measures or the tool to attain them. On this note, Brexit on financial services never really meant diverging from the main principles of investor protection and stability of the markets. Rather the ability to pursue these universal aims in a fashion that is more compatible with business practices and environment in the UK. There are various examples of that, ranging from sustainability to crypto regulation, passing through retail disclosures. Where the UK never liked PRIIPs, for instance, that did never amount to not consider retail disclosure a very important issue.  


In the immediate aftermath of the news of the adoption of the UK EU Memorandum of Understanding, representatives from the European Union had to specifically reinstate that per se it does not amount to regained access for the UK to the markets of the European Union. It is a little like mentioning a pink elephant to someone though and then ask not to think about it.  

Whilst technically the UK EU Memorandum of Understanding serves the purpose of creating a better environment for cooperation between the UK and Europe, it is that same cooperation, transparency and alignment on principles most importantly that will lead potentially to equivalence if the political climate between the party continues to stay constructive and there are no moves for deregulation.   

 Get in touch here with your contacts at Veneziano & Partners to see how we can help with the UK EU Memorandum of Understanding. 

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