Ministerial Equivalence and Exemption Directions in Financial Services for the EU and EEA

The Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019 (S.I. 2019/541), provides powers for HM Treasury, for up to 12 months after exit day, to make equivalence directions and exemption directions for the European Union and EEA member states.

On 11 April 2019, I laid before Parliament HM Treasury directions under those powers to help to ensure that the UK will have a functioning regulatory regime for financial services in all scenarios. Today, I have laid before Parliament two further directions in preparation for the UK’s withdrawal from the EU.

The Prospectus Directive and Transparency Directive Equivalence (Variation) Directions 2019 amend a previous direction made on 11 April 2019. The existing equivalence direction determines that EU-adopted International Financial Reporting Standards (IFRS) are considered equivalent to UK-adopted international accounting standards for the purpose of preparing financial statements for transparency directive regime requirements and for the purpose of preparing a prospectus under the prospectus directive regime. This decision delivered on a commitment made by the Government in November 2018, allowing overseas issuers with securities admitted to trading on a UK regulated market, or overseas issuers making an offer of securities in the UK, to continue to use EU-adopted IFRS when preparing their consolidated financial accounts for future accounting years.

On 21 July 2019, the prospectus regulation came into full application in EU legislation, and the prospectus directive, including the UK domestic legislation implementing the directive, was repealed. HM Treasury has made the Prospectus (Amendment etc.) (EU Exit) Regulations 2019 (S.I. 2019/1234) to ensure that there continues to be a coherent and functioning prospectus regime in the event that the UK leaves the EU without an agreement on 31 October 2019. This new equivalence direction therefore amends the existing direction to refer to prospectuses being prepared under the prospectus regulation rather than the directive. This amending direction ensures that the existing equivalence direction continues to be legally operable and does not change its intended effect.

The markets in financial instruments exemption directions 2019 give effect to the decision taken by HM Treasury, the European Union and the EEA European Free Trade Association countries to exempt central banks of certain states, including EEA states, from certain provisions under the markets in financial instruments regulation in the event that the United Kingdom leaves the European Union without an agreement. This direction is necessary because adaptations to the EEA agreement granting the relevant exemption are not yet operative for all affected EEA central banks. This direction will therefore ensure that those affected EEA central banks can continue to carry on their activities in the UK without disruption at exit.