Equivalence of non-EU financial services frameworks

What the EU is doing and why

Equivalence decisions allow the EU to rely on the regulatory and supervisory frameworks of non-EU countries when they are deemed comparable to the corresponding EU rules.

Equivalence decisions can help ensure better conditions for cross-border business and create new investment opportunities, contributing to fair and open trade between the EU and non-EU countries. Equivalence decisions in different areas are tailored to specific objectives.

The benefits of equivalence include for example

• reducing or even eliminating overlaps in compliance requirements for both EU and foreign market players
• making certain services, products or activities of non-EU companies acceptable for regulatory purposes in the EU
• allowing EU banks to benefit from more favourable capital requirements as regards their exposures in non-EU countries
• in specific equivalence areas, allowing non-EU firms to provide services without needing to establish a branch in the EU single-market

Equivalence assessment

Most EU financial regulation laws include provisions that make it possible for the Commission to adopt equivalence decisions. These provisions require the Commission to assess whether the rules applied in a certain non-EU country are equivalent to those applied in the EU and verify that they

• are legally binding
• ensure effective supervision by competent authorities
• achieve the same results as the corresponding EU rules

The Commission usually carries out these assessments on the basis of technical advice from the European supervisory authorities (EBA, ESMA or EIOPA).

The Commission is responsible for ensuring that equivalence decisions are introduced in a prudentially sound way, protect the level-playing field, and are compatible with EU external policy priorities, e.g. on international sanctions and the fight against money laundering and terrorist financing. When relying on non-EU country rules or supervision, the prospective benefits must not come at excessive risk and cost to the EU financial markets participants.

Equivalence decisions

An equivalence decision may take the form of an implementing or delegated act, in accordance with the equivalence provision in the relevant legislation. The decision may grant equivalence

• in full or partially
• for an indefinite period or with a time limit
• subject to specific conditions

Relevant legislation