Swiss regulatory framework deemed equivalent in Luxembourg

Numerous legal acts pertaining to EU financial market law contain provisions governing market access for third-country firms. Some of these provisions also provide for market access and/or regulatory relief if the third country can demonstrate equivalent regulation. Furthermore, so-called national regimes also exist in the area of activities with “per se” professional clients and eligible counterparties. These are effective until the EU or ESMA has reached a decision regarding equivalence for the relevant country under the applicable MiFIR provisions (including the corresponding transition periods). The existing equivalence procedures have been identified by both the federal authorities and market participants as an important element in maintaining and improving market access for Swiss banks to the EU.

National regime in Luxembourg

The national regime in Luxembourg is based on a decision of the CSSF. The corresponding details were set out in Circular No. 19/716 in April 2019. At that time, it was also announced that the CSSF would publish a list of equivalent jurisdictions for the purposes of this circular after a detailed review. This circular was updated as of 1 July 2020 with Circular no. 20/743, which includes additional information regarding the cross-border provision of services. CSSF Regulation 20-2 was adopted at the same time and contains the announced list of jurisdictions deemed by the CSSF as equivalent.

Particularly pleasing is the fact that, together with five other jurisdictions, the Swiss regulatory and supervisory framework has been deemed as equivalent. In this way, an important precondition was fulfilled for interested Swiss institutions to be able to provide cross-border investment services to “per se” professional clients and eligible counterparties domiciled in Luxembourg without being required to have a branch. Such institutions in equivalent jurisdictions are required to submit a corresponding request to the CSSF together with certain supporting documents. Further information can be found via the following links: CSSF Circular 20/743 / CSSF Regulation 20-02.

Further positive signal for open markets

Even though the CSSF’s national equivalence regime does not provide Swiss institutions with a European passport or the possibility to offer cross-border services to other EU member states, this decision can be regarded as a further positive signal in terms of open markets. In addition to this, Switzerland and the UK signed a joint statement on future enhanced cooperation in financial services only a short time before this decision was announced. In this statement, both countries announced, among other things, that mutual access to the Swiss and UK stock exchanges are to be made possible by means of mutual recognition as soon as both sides have implemented the necessary steps after the end of the Brexit transition period.

Independently of each other, both events represent a clear commitment to open and integrated financial markets as well as increased regulatory cooperation. They also show that in international comparison, Switzerland has robust and modern financial market regulations which produce a comparable effect to the corresponding EU regulations. It is now to be hoped that the as yet unfinished equivalence procedures, which are relevant for the Swiss banks, will also be swiftly addressed and unblocked at the EU level.