UK-Swiss financial services agreement seeks to align sustainability rules
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The UK government has signed an agreement with Switzerland which will allow financial services providers to operate in the other country while being regulated by the parent jurisdiction. The countries also promised to work together on sustainable finance, including making financial flows consistent with net zero.
The Berne Financial Services Agreement, which is not yet in force, comes ahead of a UK-Swiss Free Trade Agreement and marks a further step towards the closer relationship that the two global financial centres have been fostering since the UK’s exit from the EU. Apart from the hoped-for direct economic benefits, joining forces could give the two a better negotiating position with the bloc.
Under the agreement signed by chancellor Jeremy Hunt and Switzerland’s finance minister Karin Keller-Sutter on 21 December after two years of negotiations, the two countries defer to each other’s regulations where the regulatory and supervisory regimes achieve “comparable protections”. The UK is deferring to Swiss regulation for certain investment services covering wholesale markets, meaning Swiss suppliers can rely on Swiss rules and supervision when supplying those activities into the UK, while Switzerland has deferred to the UK’s insurance regulations and supervision.
Both countries have also deferred to one another’s jurisdictional level rules regarding central counterparties.
Hunt said: “The Berne Financial Services Agreement is a global first and builds on the UK and Switzerland’s strengths as two of the world’s largest financial centres. It cements open access for financial services between our two nations for decades to come, helping us grow the economy and serving as a blueprint for future agreements with other key trading partners.”
Keller-Sutter said that "this agreement helps to retain and boost the international competitiveness of the Swiss financial centre in the long term".
The agreement includes sustainable finance. Under the deal, the parties “shall engage in cooperation relating to regulatory developments in the field of sustainable finance” with a view to:
making financial flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient developments as set out by the Paris Agreement;
promote transparency on the alignment of financial flows with the Paris Agreement; and
improving the framework conditions for green digital financial technologies.
The two countries also said they will enter negotiations to:
address the mutual recognition of the quality and scope of mandatory climate-related corporate disclosures; and
recognise the role of private finance and the need to support private sector action for net-zero greenhouse gases.
The timeframe for these negotiations is yet to be determined.
For asset management, the government notes that “portfolio delegation channels between the UK and Switzerland are already open” but that the agreement “introduces commitments to maintain this openness”.
The Swiss government says that with the agreement, Swiss firms can provide UK clients with assets in excess of £2m, including individuals, with cross-border investment services directly from Switzerland. Meanwhile, British financial advisers to high net-worth individuals will no longer need to be registered by Swiss bodies, sit Swiss examinations or provide documentation evidencing suitability before they can serve Swiss clients.
The government has set out what it believes to be the benefits of the agreement for the UK in a separate document.
Both countries still need to ratify the agreement in line with their own democratic procedures. It will only come into force “on the first day of the second month” after both parties have received a notification by the other that their domestic procedures are complete. The Swiss government will submit the agreement to its parliament this year.
Do you think the deal will change the UK financial services landscape?
