The uk-eu relationship in financial services

The impact of the ‘imbalance’ in equivalence decisions between the UK and other 
third countries
95. As set out in paragraph 79, the EU’s apparent reluctance to grant the UK 
equivalence decisions marks a striking contrast to its historical approach to 
equivalence for other jurisdictions with major financial services sectors. We 
therefore took a particular interest in whether this ‘imbalance’ in the number 
of equivalence decisions put the UK at a competitive disadvantage.
96. Witnesses who addressed this question conceded that there was something 
of a competitive disadvantage, but stressed that it was not as great as the 
numerical imbalance in equivalence decisions would suggest. Sam Woods 
argued that certain third countries did have “an advantage” over the UK, 
but “it is not necessarily as great as you might think”.
134
97. The reason for this is partly because, in the words of Caroline Dawson, “not 
all of those equivalence decisions are equal in importance”. Dawson added, 
“just because the US has 21 equivalence decisions and the UK only one, 
there is not automatically some sort of imbalance in the ability to do cross 
border business. Clearly in practice there is, but it is not in the ratio of 21:1”.
135
Sir Jon Cunliffe similarly highlighted that “of the equivalence decisions 
granted by the EU to the US, Singapore and Switzerland, the majority are 
unrelated to trade and market access”, which underpinned his view that the 
129 
Q 82
130 Written evidence from LIIBA (
RFS0001
)
131 
Q 58
 (Sam Woods); see also supplementary written evidence from Sir Jon Cunliffe (
RFS0012
).
132 
Q 45
(Peter Bevan) and written evidence from London Market Group (
RFS0009
)
133 
Q 98
134 
Q 58
135 
Q 44

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THE UK-EU RELATIONSHIP IN FINANCIAL SERVICES
competitive disadvantage was “relatively limited” and not “of first-order 
importance”.
136
98. We did, however, receive evidence that for one specific equivalence decision, 
related to trading venues, the UK had lost out on business activity to the US 
as a result of the imbalance. Sir Jon Cunliffe explained:
“EU firms in scope of the EU Derivative Trading Obligation (DTO) are 
no longer able to trade some classes of derivatives on UK trading venues, 
and UK firms in scope of the UK DTO are no longer able to trade 
these derivatives on EU trading venues. This has resulted in relocation 
of some of this trading activity to venues in the United States [which has 
equivalence from both the UK and the EU]”.
137
Peter Bevan also highlighted this matter, adding, “It seems extraordinary, 
really, that when Europeans and UK counterparties want to trade with each 
other, they have to go to another continent to find a venue to do so”.
138
99. The Economic Secretary dismissed suggestions that the imbalance in 
equivalence decisions meant there was a competitive disadvantage (“not 
necessarily. In fact, probably not”), but his answer provided little detail as to 
why this was the case.
139
100.