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Brexit: The future of the single market passport for UK-based financial institutions

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Summary: In this article, Polly James explains the legal framework for the passporting regime in respect of financial services under the single market Directives and assesses what the future landscape might look like.

With the dust beginning to settle following the initial shock of the EU referendum result, financial institutions are turning to consider in earnest the practical steps that need to be taken to protect their businesses in anticipation of the strong likelihood that the UK will, at some point over the coming years, cease to be part of the EU (and, indeed, the wider EEA). 

Various claims have been made in the media – including by very senior economists – concerning the future availability of single market passporting rights to UK-based financial institutions.  Many of these claims have involved over-generalisation of this complex area, and have consequently been misleading or even inaccurate.  Given the very great importance to UK financial institutions of their passporting rights, this level of confusion is unhelpful.

In this article, we explain the legal framework for the passporting regime in respect of financial services under the single market Directives and assess what the future landscape might look like, focussing upon:

  • What are the various EU Directives under which passporting rights are established in respect of the main categories of financial services activities?; and
  • What is the position of “third country” firms (which the UK is very likely to become) in respect of passporting rights under each Directive?

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