Members of the European Parliament are currently discussing a report on cross-border regulation and supervision of financial services, under the rapporteurship of Brian Hayes MEP.

ISDA’s comment paper supports a risk-based approach to the evaluation and recognition of the comparability of regulatory regimes in third-country jurisdictions, in line with its September 2017 whitepaper on the issue.

ISDA’s paper also supports the work of the rapporteur, making a number of additional remarks, including:

• The current equivalence framework was not designed with the UK in mind and it is appropriate to apply a risk-sensitive approach to the relationship between the EU and such third countries in order to fulfil European Union (EU) objectives in the financial services area.
• The current concern to address the future relationship between the UK and other high-impact third countries should not result in a framework that makes all engagement in cross-border derivatives business more challenging.
• European Commission equivalence determinations should generally be focused on the outcomes resulting from non-EU jurisdictions’ regulatory frameworks.
• The current process for granting equivalence is insufficiently scalable.
• Existing equivalence mechanisms come with a number of challenges, including potential for withdrawal at short notice, inconsistency across different pieces of legislation, and the lack of a clear process for consultation with third countries.
• Equivalence is crucial to the ability of firms to operate effectively in non-EU markets.