Interim report: The UK regime for overseas firms

Published 30 Nov 2020

  • The UK has historically followed a relatively open approach to market access.  To enhance its competitiveness in a global environment, and to maximise the benefits to UK markets and UK users of financial services, the UK needs to continue this open approach.
  • The UK should take the opportunity presented by Brexit to make its approach to access its market clearer and more coherent, in order to remove perceived barriers to overseas firms. 
  • The UK regulatory perimeter is not as clear as it could be.  New guidance should be issued in order to allow overseas firms to understand what services they can provide to UK users of financial services, either with or without authorisation in the UK.
  • The overseas persons exclusion (OPE) is a valuable element of the UK’s regulatory perimeter.  There is some scope to rationalise it and make it clearer, but the UK should not be considering any changes that would restrict the OPE at least in relation to wholesale business. 
  • The regime for overseas firms to establish regulated branches in the UK should be updated to include, in particular:
    • a clearer framework, particularly with regard to the scope of "deference" to the home supervisor of the overseas firms);
    • establishing better processes through which applications will be considered;
    • amending the factors for authorisation to introduce a requirement that the UK regulators ‘have regard to’ the attractiveness of the UK as an inward investment destination, innovation and applicable international standards; and
    • simplifying and improving the navigability of the regulatory requirements applicable to UK branches.
  • As regards cross-border access for overseas firms not covered by the OPE regime, the UK should continue to have an equivalence-style regime, but based on the concept of “deference” rather than an EU-style detailed analysis of equivalence.  We should also consider whether this would be a suitable basis for allowing wider access in relation to retail financial services. 
  • The UK should take this opportunity to reconsider whether any other aspects of the UK regime could be improved to make the UK more attractive to overseas firms. This could include removing some of the elements of EU law that are perceived to have little benefit, as well as making more fundamental changes.