LONDON (Reuters) - The European Union’s markets watchdog said it has approved an agreement on supervisory cooperation with Britain after Brexit to avoid disruption to cross-border financial services like asset management.
“The board agreed in substance the Memorandum of Understanding and will provide more detail shortly,” a spokesman for the European Securities and Markets Authority (ESMA) said on Thursday.
The MoU was negotiated with Britain’s Financial Conduct Authority (FCA) to ensure that regulators in the bloc and London agree to exchange information on financial firms that have cross-border business.
The announcement “brings much needed certainty for asset managers,” said Chris Cummings, chief executive of the Investment Association, Britain’s asset management trade body.
“These agreements ensure that delegation of portfolio management, and the necessary exchanges of information needed for the orderly functioning of markets, can continue regardless of the outcome of the Brexit negotiations,” he added.
Britain is due to leave the EU on March 29 and an MoU is a standard feature of supervisory relations between the bloc and non-EU countries.
An MoU is critical for the funds industry, particularly as Britain could crash out of the bloc in two months’ time unless it comes up with an agreed divorce settlement with Brussels.
Without an MoU there could be no “delegation”, or asset managers in Britain making investment picks for funds listed in Dublin, Luxembourg or elsewhere in the EU.
“The ESMA board agreed in substance the MoU and we will provide more detail shortly,” an FCA spokesman said.
“We encourage EU member states to take up ESMA’s effort and work with the FCA to finalize these understandings, so funds can remain focused on serving their investors’ needs,” Patrice Berge-Vincent, managing director of international trade body ICI Global, said.
While ESMA negotiated the MoU, it has to be signed by regulators from each of the remaining 27 EU states.
“Firms that delegate portfolio management to the UK can have sufficient confidence that this will continue to be allowed post 29th March,” said Ed Sibley, deputy governor of the Central Bank of Ireland said earlier this month.
Reporting by Huw Jones in London and Ishita Chigilli Palli in Bengaluru, Editing by Lawrence White and Catherine Evans