Partner Barnabas Reynolds, head of Shearman & Sterling’s global Financial Institutions Advisory & Financial Regulatory Group, has authored A Blueprint for Brexit: The Future of Global Financial Services and Markets in the UK, published by POLITEIA on November 2, 2016. In this paper, Reynolds sets out two models for leaving the European Union that will enable UK’s financial services and global markets to maintain their pre-eminence.
Reynolds addresses the issues with adopting the EU's passporting system:
- Britain would be obliged to make concessions to the EU (e.g., on sovereignty or free movement of persons); and
- Passporting would subject the UK’s financial services to the growing trend of EU protectionist and non-market-friendly rules that the UK would have no part in formulating.
He offers two alternative models to the passport under which the financial services sector can succeed:
- An “Expanded Equivalence” model, which would extend the equivalence arrangements now in place for third countries (e.g., the US or Australia) to access the single market. This would allow the UK some flexibility around the removal and reworking of EU laws and prevent the UK from being subject to EU law-making, ESA oversight and ECJ decisions.
- A “Financial Centre” model, which would allow the UK to establish a market-friendly regulatory framework, in accordance with global standards and the best global and UK practices. The UK has led the way in shaping global financial regulation and should continue to do so. This model would allow the country to re-evaluate its regulatory structure and move away from the unnecessary processes introduced in EU laws, allowing it to focus on outcomes.
Either of these two models will enable almost all the UK financial sector to continue to provide services to EU counterparties and customers without interruption, even without the passporting process.
View full paper, A Blueprint for Brexit, Authored by Reynolds