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.