09 December 2016

欧州議会、EU（欧州連合）銀行規制における第三国同等性条項に関するブリーフィングを公表

What is the difference between ‘passport’ and ‘equivalence’?

The principle of free movement of services stems from the Treaty. It has been further specified in EU secondary law where the concept of ‘passport’ has gradually emerged. In the field of banking and other financial services, the passport gives banks in the EU the right to provide financial services throughout the EU, under the license granted by their home country and under the home country supervision.

The passport relies on two elements:

• Minimum prudential requirements harmonised under EU law;
• Mutual recognition of licenses. The EU passport is particularly well-established in banking services.

Passporting rights for banking activities were formalised into EU law by the second banking directive in 1989. The banking passport allows banks to provide banking services throughout the EU, either directly from their home country or via branches established abroad that do not require the authorization of the host Member States. Under the EU passport regime, there is no need to open a fullyfledged local subsidiary to provide banking services in another Member State. Subsidiaries are separate legal entities subject to host country licensing and supervision that have to meet capital requirements on a solo basis. Using passporting rights to operate branches is more time and cost effective.

EU Member States have full access to the Single Market and benefit from all passporting rights. Beyond the EU, passporting rights are only available to members of the European Economic Area. To date, there is no precedent of passporting rights without full membership of the EU or acceptance of all relevant EU rules and regulations (EEA model). The EU passport as such is not available to thirdcountries (i.e. a country not being part of the EU or the EEA).

However third countries are entitled to ask for the so-called “equivalence” treatment by the EU. As opposed to the EU passport, the concept of third country equivalence is a much more piecemeal approach. Equivalence can only be requested by third countries where it is explicitly provided for in EU legislation (since it is not available with respect to the provision of all services, or the servicing of all client types). Equivalence provisions are tailored to the needs of each specific act and their meaning varies from one legal text to another. Following a request by a third-country, equivalence is assessed by the Commission. Theoretically equivalence can be withdrawn at any time (although there is no precedent). 

According to the Commission, equivalence clauses are made for the mutual benefit of both EU and third country financial markets and institutions. As underlined in the recitals of the relevant legislative acts, equivalence clauses support three objectives:  it reduces or even eliminates overlaps in regulatory compliance for the EU and/or third-country entities concerned,  it leads to considering certain services / products / activities of third countries’ firms as acceptable for the various regulatory purposes in the EU,  it allows to apply a less burdensome prudential regime in relation to EU financial institutions’ exposures to an equivalent third country. Equivalence is therefore often conditional on reciprocity by the third-country. For businesses and countries not governed by an equivalence regime, third country institutions or service providers must 

Equivalence clauses in EU banking legislation

Whether or not equivalence is available -and what it implies- varies across legislations. In some cases, the EU legislation has included a “third country regime” which allows non-EEA firms to provide services into the EEA if their home country regulatory regime is “equivalent” to EU standards. In other cases, equivalence clauses serve other limited purposes (e.g. risk-weights to be applied by EU financial institutions to exposures to third-country firms for the calculation of prudential ratios). Overall, if wholesale financial services may benefit from passport-like rights under equivalence clauses in specific cases, this is never provided for retail financial activities. It is noteworthy that CRD IV/CRR does not provide any passport-like rights for third countries, even for wholesale banking business. CRD IV/CRR equivalence is limited to the prudential treatment of certain types of exposures to entities located in non-EU countries. It allows EU based institutions to apply preferential risk weights to the relevant exposures in third countries whose prudential supervisors and requirements are deemed equivalent to the EU by the Commission. CRR equivalence clauses are irrelevant in terms of EU market access for third country firms. An overview of equivalence clauses available in EU key banking and financial legislation can be found in Table 11 . For a more detailed analysis, see table in annex.

Assessing equivalence

The European Commission (DG FISMA) is responsible for carrying out technical assessments of equivalence. These are usually based on advice from the three European Supervisory Authorities (EBA, EIOPA, and ESMA). Assessments typically involve a close exchange with the third country assessed. Equivalence decisions can take the form of an implementing or a delegated act, depending on the relevant piece of legislation. The decision may specify whether equivalence is granted in full or partially, for an indefinite period until withdrawal or with a time limit. Following an equivalence decision under some regulations (e.g. EMIR, MIFIR), individual firms have to apply for recognition from ESMA. The timeline required to obtain an equivalence decision varies across cases as the Commission is under no specific obligation to decide under a specific dead line. The European Market Infrastructure Regulation (EMIR), for example, entered into force in August 2012. It took up to 4 years for the Commission to assess the equivalence regime of US CCPs before taking its decision in March 2016 (For a detailed overview of Commission equivalence decisions, see table in the Annex).

Full briefing

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