Background: Swiss-UK relationship following Brexit
Prior to Brexit, Swiss-UK relations in key areas, such as the movement of goods and people, were based on the bilateral agreements between Switzerland and the European Union.
Following the UK’s effective departure from the EU after the end of the transition period on 31 December 2020, these had to be substituted with new agreements with the UK Government. Nine such agreements in total were entered into, including, on trade, citizens’ rights, service mobility, social security, air and rail services and direct insurance.
What had been notably lacking between the two countries that are home to two of the most important financial centres in Europe was a broader financial services agreement. As early as 30 June 2020, a Joint Statement on deepening cooperation in financial services was signed. However, it took another 3.5 years for a formal agreement to be concluded.
The Berne Financial Services Agreement
Purpose & key characteristics
The agreement has been hailed as ‘ground-breaking’ by the UK Government providing a ‘new and innovative model of mutual regulatory recognition’ and establishing a ‘new global best practice for regulatory and supervisory cooperation’.
The purpose of the agreement, according to the Swiss Government, is to ‘facilitate cross-border business activities, while at the same time ensuring financial market stability and integrity, and guaranteeing client protection’.
Following an in-depth assessment of each other’s financial legislation and regulations based on jointly agreed criteria on financial stability, financial market integrity and client and investor protection, Switzerland and the UK have recognized as equivalent the other country’s legal and supervisory framework for financial services. This system of mutual recognition is supplemented by enhanced supervisory and regulatory cooperation.
Scope of application
The agreement focuses on the following business activities and market participants:
- Banking services
- Asset management
- Insurance services
- Stock exchanges and other financial market infrastructures
- Swiss financial institutions will be able to provide financial services to high net worth and professional UK clients, either on a cross-border basis or by way of temporary local operations.
- For UK financial services providers, cross-border business activities in Switzerland will be further facilitated by allowing client advisors to temporarily serve Swiss high net worth clients without having to register in Switzerland.
- Confirmation of the existing national regimes for the advertisement and offering of collective investment schemes, the delegation of investment decisions and portfolio risk management.
- Only larger professional policyholders / corporate clients.
- Life insurance, accident & health insurance, monopoly and business interruption insurance still excluded; liability insurance only for specific professional policyholders.
- Independent UK insurance intermediaries relieved from localization requirement under revised Insurance Oversight Act entering into force on 1 January 2024.
Stock exchanges and other financial market infrastructures
- Mutual recognition of general legal and supervisory framework for trading venues, CPs and OTC derivatives.
- Facilitated compliance with certain obligations for cross-border transactions.
- The agreement contains dispute settlement provisions providing for the establishment of a joint committee from both countries.
- Both countries have committed to close cooperation in the area of sustainable finance with a possibility of future mutual recognition.
- Each country retains the right to amend its financial services legislation and regulations at any time, with an information and consultation mechanism to be established.
- Regular reviews of the agreement and its implementation and possible inclusion of further sectors (such as digital financial services).
- As the agreement does not contain directly applicable rights and obligations for private parties (whether legal or natural persons), they will not be able to invoke it directly.
Following its signature, the Berne Financial Services Agreement is now awaiting parliamentary approval by both countries. In Switzerland, the Federal Council is expected to submit the dispatch of the agreement to Parliament in the first half of 2024.
Industry organisations in both countries, among them, the Swiss Bankers Association (SBA), the Asset Management Association Switzerland (AMAS), SIX Swiss Exchange, TheCityUK, UK Finance and the City of London Corporation, have enthusiastically welcomed the signing of the agreement.
Separately to the Berne Financial Services Agreement, Switzerland and the UK are also currently negotiating an enhanced Free Trade Agreement.
We will provide regular updates in respect of the timeline and implementation of both agreements.
- Text of the Berne Financial Services Agreement.
- Side letter: Auxiliary services for insurance.
- Side letter: Financial market infrastructures.
- SBA, AMAS and SIX press release.
- HM Treasury video post.