Financial services: MEPs want more say on equivalence of EU/third country rules
Transparent procedures are needed to govern the adoption, withdrawal or suspension of decisions as to whether third country rules are equivalent to EU ones, say ECON MEPs.
Equivalence decisions are political
EU Equivalence decisions designed to maximise financial stability, reduce systemic risk and close regulatory loopholes between jurisdictions, are currently taken unilaterally by the EU’s executive Commission, yet they also have a political dimension, say Economic and Monetary Affairs Committee MEPs in a text voted on Wednesday.
They stress that the EU should have an active role in global standard setting, so as to improve international consistency in financial regulation. Granting equivalence to a third country in the area of financial services entails balancing various policy aims and as such should be subject to appropriate scrutiny by the European Parliament and Council, says the text.
MEPs therefore propose that equivalence decisions be taken via a “delegated act”.
Equivalence decisions aim not only to ensure fair and equal regulatory and supervisory treatment between EU financial institutions and third-country ones, but also to uphold high EU standards, say MEPs, stressing that both EU and third country rules must help fight tax evasion, tax fraud, tax avoidance and money laundering.
MEPs reiterate that although most equivalence decisions do not grant third country financial institutions the right to provide financial services throughout the EU, the current legislation provides for various approaches that allow for a range of possible advantages or benefits, depending on the financial service provider and the market in which it operates.
They also advocate a “structured horizontal framework” for recognising and supervising “equivalent” third country regimes and empowering European Supervisory Authorities (ESAs) to advise the EU Commission and review developments in third countries. They also call on the Commission to report annually to the European Parliament on all decisions.
Without pre-empting the outcome of the Brexit negotiations, MEPs stress that the UK’s withdrawal from the EU could potentially have a significant impact on the regulation and supervision of financial services, given the currently close relations that between EU member states in this area.
Brian Hayes (EPP, IR), the lead MEP said: "With the adoption of this draft report by a broad majority of the ECON Committee, we have given a clear signal to the Commission that MEPs want the EU's equivalence regime to be upgraded. This is the first time that the ECON Committee has taken a substantive position on equivalence so today's vote is a welcome development. We have made it clear that a consistent framework for equivalence needs to be developed and that all equivalence decisions should be taken by way of delegated acts, so that Parliament has proper oversight of such decisions."