UK and Switzerland deal: The Berne Financial Services Agreement

In December 2023, the UK and Switzerland reached an agreement for the mutual recognition of their respective regimes to enable the cross-border provision of financial services with respect to wholesale and sophisticated clients (the Berne Agreement). 

The Berne Agreement is based on the principle of deference, whereby each country accepts that the rules of the other attain similar outcomes and objectives to their own. The UK Government explains that the agreement is meant to be flexible and pragmatic, allowing for it to be built on/amended in the future in light of regulatory changes and developments (there are, for example, provisions concerning cooperation in relation to sustainable finance). 

The UK and Switzerland have existing arrangements concerning financial services in insurance and other areas already but have also been in negotiations since 2020 in relation to finalising an agreement for a wider range of financial services. While the Berne Agreement may facilitate the cross-border provision of financial services between the UK and Switzerland, it is important to note that the pre-existing Overseas Persons Exclusion (see here for more information) also permits Swiss firms to provide certain services to wholesale clients in the UK subject to certain conditions.

The Berne Agreement covers market access for financial service providers in the areas of: banking services; asset management; insurance services; and financial market infrastructures.The main body of the agreement is supported by various sectoral annexes detailing the types of financial services, providers, and clients that are in scope. 

Investment services

This is covered in Annex 5 of the Berne Agreement and provides access in the UK to Swiss firms for services similar to the investment services under UK MiFID II. The scope isn't completely aligned to UK MiFID II, as organised trading facilities (OTFs) will not be able to provide cross-border services under the Agreement whereas multilateral trading facilities (MTFs) and exchanges will be.

Certain conditions must be fulfilled by Swiss firms providing services into the UK (this includes pre-contractual disclosure; an annual report to the FCA and FCA notification) and for UK firms providing services into Switzerland (this includes disclosure document containing specified information).

The Berne Agreement builds on the existing regime that already allows UK firms access into the Swiss investment services market in certain circumstances by introducing commitments to permit services to institutional and professional clients, including high net worth individuals (those with net assets over £2 million). Financial advisers will no longer be required to be registered with Swiss registration bodies, nor will they need to sit examinations and provide documentation to prove that they meet the requirements necessary to provide their services to private clients in Switzerland.

Banking 

The Berne Agreement will build on existing arrangements allowing UK banks to provide lending and deposit taking services to corporate clients in Switzerland.

Asset management

This is set out in Annex 1 of the Berne Agreement and confirms the existing access for the advertising and offering of collective investment schemes to per se professional clients, eligible counterparties, and elective professionals. It also confirms delegation of portfolio management and risk management.

What now

The Financial Services and Markets Act 2023 (see here for background) allows the UK Government to give effect in domestic law to mutual recognition agreements in relation to financial services. In addition to the Berne Agreement, the UK is also currently negotiating an enhanced Free Trade Agreement with Switzerland.