BAKGRUNN (fra kommisjonsmeddelelsen, engelsk utgave)

Introduction

The EU has consistently pursued the objective of strengthening the internal market in financial services by putting in place a single rulebook and a common supervisory architecture for its Member States. In recent years, the EU has achieved tangible progress in this respect by establishing the Banking Union and laying the foundations for the Capital Markets Union.

In keeping with the global nature of financial markets, the EU considers how its domestic framework for financial services covers cross-border activities and exposures to risks in third countries and how that framework interacts with other regulatory regimes. At the same time, the EU monitors and, where necessary, dynamically responds to external regulatory and supervisory developments (meaning improvement or deterioration of bilateral cooperation/mutual trust) that may impact the broader regulatory environment for market participants active in the EU. In doing that, the EU strives to maintain a resilient and effective prudential framework that addresses risks related to cross-border activity insofar as they impact EU financial stability, market integrity, investor protection and the level-playing field in the internal market. At the very least, this means aiming to avoid conflicting requirements and reducing opportunities for regulatory arbitrage.

The EU is not the only regulatory area facing this challenge. The EU financial services law as well as financial regulatory systems in third countries draw from international standards, developed jointly in international bodies like the Financial Stability Board, the Basel Committee on banking supervision, the International Association of Insurance Supervisors and the International Organisation of Securities Commissions, under the political direction of the G20. International standards help all jurisdictions ensure that similar risks can be addressed in a similar way and that races to the bottom - prone to creating financial instability and contagion risks in global markets - are avoided. The overall G20 framework is also underpinned by a network of bilateral cooperation arrangements, both at regulatory and supervisory level. Cooperation contributes to building mutual understanding and trust among jurisdictions, which is a pre-requisite for managing cross-border risks. The EU commitment to global regulatory convergence around international standards is unwavering. At the same time, these global frameworks have a general standard-setting purpose and are not always fit for addressing concrete questions emerging in a specific bilateral context.

Jurisdictions across the globe use different methods to manage internally the various risks and challenges deriving from cross-border activities. These methods range from applying the domestic regime in cross-border situations, to deferring to third-country rules and supervisory outcomes, to fully exempting certain cross-border activities.

The main EU approach, referred to as equivalence, involves a positive assessment of the third-country framework, which enables reliance on third-country rules and the work of the third-country supervisor.

In practice, the EU may determine that the regulatory or supervisory regime of a third country is equivalent to the corresponding EU regime and this allows authorities in the EU to rely on supervised entities' compliance with equivalent rules in such third country. This approach involves decision-making processes by the Commission, preceded by an assessment which follows criteria established in EU law. From the outset, it also involves dialogue with the authorities of the third countries under assessment.

This approach reconciles the effectiveness of the EU single rulebook and supervision and enforcement by EU authorities with offering adequate opportunities for cross-border activity in financial services and markets. Indeed, equivalence decisions can contribute to foster cross-border business.

Today, EU financial services law includes around 40 provisions allowing the Commission to adopt equivalence decisions. On this basis, until today, the Commission has taken over 280 equivalence decisions for more than 30 countries, across various parts of the financial industry.

EU equivalence has been improved in a number of legislative acts agreed recently by EU legislators and relating to the European Supervisory Authorities, European market infrastructures and the prudential treatment of investment firms. These improvements have emphasised that equivalence and ensuing supervisory decisions need to be risk-sensitive, reflect closely the regulatory and supervisory regime of the third country under assessment and take into consideration the impact of the third-country activities on EU markets. These improvements also stipulate clearly that compliance with the criteria and conditions under which an equivalence decision is adopted needs to be ensured by the third country on an ongoing basis.

With these new improvements about to enter the EU rulebook, and in light of international policy developments, it is timely to take stock of the EU’s overall approach to equivalence and to present some of the current challenges that this policy faces today. In February 2017, the Commission services published a Staff Working Document, which provided a first comprehensive assessment of equivalence in financial services. Building on that technical work, this Communication sets out the Commission’s current equivalence policy priorities, outlines recent legislative improvements and refers to key aspects of the assessment and the decision-making processes. Finally, it presents recent and ongoing work on equivalence assessments and monitoring.