What Is Passporting?
Passporting is the exercise of the right for a firm registered in the European Economic Area (EEA) to do business in any other EEA state without needing further authorization in each country. Often companies based outside of the EEA will get authorized in one EEA state and use its passporting rights to either open an establishment elsewhere in the EEA or providing cross-border services.
This is valuable to multinational companies because it eliminates a lot of the red tape associated with gaining authorization from each individual country, a process that 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 EU, or to open branches in other countries, with only a small number of additional requirements. This authorization can be referred to as 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 a number of multinational companies – especially larger international banks – would leave the U.K. and base elsewhere in order to retain their passporting rights and access to the single market.