Singapore among 5 countries to be stripped of some EU market access rights this week: FT

SINGAPORE (July 29): The European Commission will strip Singapore and four other countries of some market access rights this week, according to a Financial Times report citing a document.

The European Commission will deem that Singapore, Canada, Brazil, Argentina and Australia no longer regulate credit rating agencies as rigorously as the European Union – thereby removing a status that makes it possible for European banks to rely on those rating.

The bloc grants financial market access right, or so-called “equivalence provisions” to non-EU financial firms such as lenders, investment firms, clearing houses or credit rating agencies, as long as it considers their home rules to be in line with the EU’s.

This will be the first time that the access rights have been withdrawn, though temporary permissions for Switzerland were allowed to lapse earlier.

“We had extensive dialogue with those countries, so they knew there was an issue and they knew there may be consequences,” Valdis Dombrovskis, the EU commission vice-president in charge of financial regulation, is quoted as telling the FT. “If they, during several years, chose not to update their legislation, then we had to take the decision to withdraw equivalence.”

Zulema Aragonés Monjas, head of European compliance at DBRS, a Canadian rating agency, reportedly told the FT that the European Commission decision to repeal equivalence for Canada will have “no impact” on the agency’s business.

However, the move is seen by some as a warning to the UK.

According to a draft document to be presented by officials in Brussels later this week, the UK should expect a “rigorous” assessment of its regulations before financial firms will be allowed to do business in the EU after Brexit.

“The determination of the equivalence of a third-country regime results from a rigorous case-by-case assessment,” the document said.

Without mentioning the UK by name, the document said that “high-impact” countries with tighter links to the EU’s financial system “present a more significant set of risks which the commission will need to address.”