Almost four years following Brexit, in December 2023, the
United Kingdom and Switzerland signed a mutual recognition agreement in the
financial services sector. The ‘Berne Financial Services Agreement’ covers
areas such as asset management, banking, investment services, and insurance.
This paper provides the first analytical review of the Agreement by placing it
within the broader theoretical framework of ‘regulatory divergence’ and ‘mutual
recognition’.
This paper starts with a basic taxonomy of regulatory
‘deference’, including institutional frameworks used to achieve regulatory and
prudential objectives in the financial services sector. It then highlights the
sensitivities at play and analyses the modalities and mechanisms of divergence
and deference. The paper reviews negotiated examples, including the
UK-Switzerland mutual recognition agreement, before identifying the path
forward in the UK-European Union relationship in the financial services sector.