What Is Passporting?
Passporting allows a firm registered in the European Economic Area (EEA) to do business in any other EEA state without the need for further authorization from each country. Often companies based outside of the EEA will get authorized in one EEA state. The company will then use the passporting rights it receives from that country to either open an establishment elsewhere in the EEA or provide cross-border services.
Passporting is a valuable asset for a multinational company. It eliminates the red tape associated with gaining authorization from each country, a process which can be lengthy and costly for a business.
For financial companies in the EEA, once a firm is established and authorized in one EU country, it can apply for the right to provide defined services across the European Union (EU) or to open branches in other countries, with only a small number of additional requirements. This authorization can be a firm's financial services ‘passport’.
Brexit and Passporting
After Brexit, where the U.K. voted to leave the European Union in June of 2016, financial markets experienced a high level of uncertainty, as no one knew what would happen to the U.K. economy. Many speculated that some multinational companies, especially larger international banks, would leave the U.K. and base their operations elsewhere to retain their passporting rights and access to the single market.