In a virtual meeting held on 27 January 2021, the Swiss Federal Councillor, Ueli Maurer, and the Chancellor of the Exchequer, Rishi Sunak, set the roadmap for negotiations on a mutual recognition agreement in the financial sector in order to enhance cooperation, trust and the cross-border market between the United Kingdom and Switzerland.
On 30 June 2020, the two countries signed a joint statement agreeing on their shared ambition to develop an international agreement on financial services. The joint statement outlined the objectives of the mutual recognition agreement and the basis of the cooperation.
Following discussions on the progress of the cooperation taking place as part of the financial dialogue of 8 September 2020, the two countries held a virtual meeting on 27 January 2021. In that context, the two financial ministers acknowledged the success of initial exploratory talks and agreed on moving forward with negotiation on delivering a comprehensive agreement.
Purpose and model of cooperation
The purpose of the mutual recognition agreement is to improve access to the cross-border provision of financial services, as well as to reduce or remove costs and barriers for UK firms accessing the Swiss market and vice versa.
This is expected to be achieved through mutual recognition of each other's regulatory and supervisory regimes in the fields of insurance, banking, asset management and capital markets (including market infrastructure).
The prospective agreement will follow an outcome-based approach and establish the appropriate regulatory and supervisory framework allowing the cross-border provision of financial services between the United Kingdom and Switzerland, while reducing the regulatory frictions.
Stock exchange equivalence
Earlier in January 2021, the United Kingdom launched legislation aimed at granting share trading equivalence to Switzerland's trading venues. Subject to parliamentary approval, this will come into force on 3 February 2021, with the expectation that Switzerland will reciprocate removing restrictions on UK trading venues.
Since 2019, as an EU member at the time, the United Kingdom has had to comply with the EU decision to revoke its recognition of Swiss stock exchanges, which cost the City of London almost EUR 1.2 billion per day in trades.
Impact and next steps
The commitment to a mutual recognition agreement signals the United Kingdom's wider vision for the industry since the country's departure from the European Union, as well as demonstrates the United Kingdom's strategy to cement London's role as an international financial centre.
The Chancellor of the Exchequer, Rishi Sunak, said in a speech he gave in June 2020: "Nearly half of all Swiss financial services imports come from the UK; and the UK is one of the main destinations for Swiss foreign direct investment. And as the two biggest financial centres in Europe, we also share a common governing and regulatory philosophy."
Both countries have expressed their shared belief in the value of open and resilient financial markets and are committed to high regulatory standards, market integrity and investor and consumer protection.
The discussions are set to continue at official level over the coming months and the agreement's impact on other areas, including taxation, is expected to be significant.
Further information can be found here.