How ‘Equivalence’ Stands to Shape Post-Brexit Banking

British banks have had to lower their expectations for how they’ll do business with the European Union after Brexit. The U.K. government had to drop its initial demand that British-based banks retain easy access to the single market. Now it’s certain that the City of London financial district will have to make do with the same framework available to other non-EU countries, an arrangement known as regulatory “equivalence.”

Generally speaking, it’s Nation A accepting that Nation B’s rules are as strict as its own and letting Nation B’s companies do a limited amount of business on its territory. For the EU, it’s the job of the European Commission to decide on whether a non-member’s rules and oversight of specific businesses are “equivalent,” based on assessments by the bloc’s supervisors. The commission can take as long as it likes to make a decision.