Four positions for a Swiss firm's UK business outside the Berne Agreement

Where the structuring decision lies

The Agreement was drafted as a defined channel, with nothing of a general licence about it. Deference is granted for a combination of covered service, covered financial instrument and category of covered client, and the register entry records that combination. Business outside it is not covered business. A firm that maps its intended UK activity in full will usually find a residue: a client who meets no covered category, an instrument outside the closed list, an activity the annex does not name, or a service it wants to run from a London office in place of Zurich. That residue is where the structuring decision lies, and it is worth mapping at the outset, before it is discovered one declined client at a time.

What the Agreement does not reach

Five limits define the residue, and each of them sits in the text itself, with no need to look to guidance.

• Clients. Only per se professional clients, eligible counterparties and high net worth covered clients on the Annex 5 test, all resident or established in the United Kingdom. Retail clients who do not meet the high net worth test are outside. Elective professional status under UK rules is not itself a qualifying category: a client who has opted up is reachable only if that client separately satisfies the Annex 5 high net worth test. The client test is the subject of its own analysis.
• Instruments. A closed list: transferable securities, money market instruments, collective investment schemes and alternative investment funds including money market funds, and options, futures, swaps, forward rate agreements and other derivative contracts that are financial instruments.
• Horizontal law. Deference covers authorisation measures and a listed set of prudential measures. It does not touch horizontal regulation, and FINMA says so expressly, naming anti-money-laundering rules. Product intervention is carved out of the conduct-of-business deference, and obligations arising from trading on a UK trading venue are not relieved.
• The branch. Registered business cannot be carried on from, or under the supervision or control of, a UK permanent establishment, and deference does not extend to the employees of a UK branch. A firm may not hold a Part 4A permission for the same service, instrument and client category it has notified.
• Durability. Recognition can be withdrawn and the Agreement can be denounced, on periods measured in months. This limit is dealt with separately below.

Option one: shape the book to fit the Agreement

The first position treats the perimeter as a commercial constraint and designs around it. In practice that means notifying widely at the outset, including the communication activity that establishes whether a UK prospect qualifies as a high net worth covered client, and then running a client-acceptance filter so that ineligible relationships are declined or routed elsewhere before onboarding.

This is the cheapest position and for many Swiss portfolio managers and private banks it is the correct one: a wholesale and high net worth UK book in transferable securities and funds fits inside the Agreement without strain. Its weakness is that the constraint is permanent and falls on the relationship managers, who meet the perimeter first, usually in a meeting; the moment a relationship grows into a product the Agreement does not cover the firm has to decline, restructure, or fall back on one of the positions below. Firms taking this route should write the perimeter into the client-acceptance policy; the compliance manual is the wrong home for it.

Option two: the overseas persons exclusion

The overseas persons exclusion in article 72 of the Regulated Activities Order predates the Agreement, survives it and is expressly preserved: the FCA confirms that the new access does not replace existing routes and that firms choose between routes on an activity basis. The exclusion is available beneath the register entry, and it is narrower than the safety net it is sometimes taken for.

Its structure is transactional. The exclusion operates activity by activity and, in its central limbs, depends either on entering into the transaction with or through an authorised person, or an exempt person acting in the course of business comprising a regulated activity in relation to which it is exempt, or on the transaction being the result of a legitimate approach. That phrase carries the weight and it is defined at article 72(7) by reference to the financial promotion restriction in section 21 of the Financial Services and Markets Act 2000. An approach made to the overseas person is legitimate if it was not solicited by the firm or was solicited in a way that does not contravene section 21; an approach made by or on behalf of the overseas person is legitimate if it does not contravene section 21.

The exclusion also has a fixed outer edge: article 72 excludes dealing (articles 14 and 21), arranging (article 25) and advising (article 53) by an overseas person, and, under article 72(6), agreeing to manage or safeguard investments, but managing investments (article 37) and safeguarding (article 40) themselves are never within it, so a Swiss portfolio manager or custodian with UK clients cannot rely on it for the mandate or the custody, whatever the approach. A marketing-led UK strategy is therefore not excluded in principle, but every approach has to fit within a financial promotion exemption or be approved by an authorised person, and it is the firm that has to show which one applied.

The provision has also been amended repeatedly. The consolidated text records the BFSA carve-out inserted on 1 January 2026 and the targeted support amendment commenced in two stages on 23 February and 6 April 2026, and the site notes further changes that may be brought into force at a future date. Paragraphs on ESG ratings already appear in the consolidated text because the ESG Ratings Order 2025 was commenced in December 2025 for limited enabling purposes; they take substantive effect on 29 June 2028. Any analysis of the exclusion performed even twelve months ago needs re-running against the current consolidated text; a recollection of it will not do.

The practical conclusion is that the exclusion is a sound answer for reverse-solicited business and for dealing conducted with or through UK authorised intermediaries, and a demanding one for a firm that intends to go out and win UK clients, because each approach must be brought within the financial promotion regime. The FCA's perimeter guidance confirms that a registered firm may rely on the exclusion for activities outside its register entry, so the combination is legitimate; a supervisor asking about it will expect the firm to show, activity by activity, which route it used.

Option three: a UK branch

A branch gives a UK presence, a UK address and the ability to hold Part 4A permissions, and for a Swiss bank it is the traditional route. Two features of the current position need attention.

The first is the Agreement's own exclusivity rule. A branch cannot be used to carry on the business notified under the Agreement, and deference does not extend to the branch's employees, although it does extend to employees of the Swiss entity present in the United Kingdom temporarily where that presence is not a permanent establishment. Opening a branch therefore does not widen BFSA access. It creates a second, parallel channel with its own permissions, and the firm has to keep the two apart in its booking model, its supervision arrangements and its client documentation, then evidence the split activity by activity.

The second is the PRA's posture on deposit-taking branches, which was recalibrated in May 2025: policy statement PS6/25, published on 20 May 2025, raised two thresholds for inflation, added a total instant access threshold and recast the deposit-related thresholds in supervisory statement 5/21 on international banks. The current version of the supervisory statement, published on 22 April 2026 with effect from 24 April 2026, implements the first phase of the PRA's Senior Managers and Certification Regime review (PS12/26) and leaves those branch expectations standing.

The statement says that the PRA expects new branches of international banks operating in the United Kingdom to focus primarily on wholesale banking activities, and it sets out the deposit-related factors that push a firm toward incorporating instead. The PRA expects branches to hold under GBP 130 million of retail and small company instant access balances covered by the Financial Services Compensation Scheme, and under GBP 300 million of total retail and small company instant access balances whether covered or not. It will take the number of customers into account, treating more than 5,000 retail and small company customers with accounts used for transactional purposes as a potential concern. It will look at planned growth even where current balances sit inside appetite. And it will not in general be content for a branch to undertake deposit activity where the total potential liability to the compensation scheme exceeds GBP 650 million.

Two cautions on those figures. They are indicative supervisory factors, with no hard legal limit behind them, and the statement applies to PRA-authorised banks and PRA-designated investment firms. A Swiss portfolio manager or securities firm whose UK operation would be solo-regulated by the FCA sits outside that statement, and its analysis runs through FCA authorisation and the FCA prudential regime instead. It is also worth noting, because the vocabulary collides, that the PRA uses a high net worth individual definition of GBP 250,000 in net assets for these deposit purposes, as evidence that may weigh in a branch's favour where deposits exceed the indicative factors. It has nothing to do with the GBP 2,000,000 covered client test under the Agreement, and the two should never appear in the same policy document without a distinction drawn.

Option four: a UK subsidiary, and what the cost buys

A UK subsidiary is the most expensive option and the only one that removes the perimeter question without narrowing the Swiss entity's own register entry. An authorised UK entity holds its own permissions, faces its own clients, can serve retail and elective professional clients if authorised to do so, can use instruments outside the Annex 5 list, and does not depend on the continued existence of a treaty. It also carries its own capital, its own governance and senior-manager population, its own reporting, its own conduct obligations including the Consumer Duty where it deals with retail clients, and a group exposure that did not previously exist.

For a board, a subsidiary is an investment decision with a regulatory delivery risk attached: an authorisation project measured in quarters, and a permanent cost base thereafter. It earns its keep where the UK book is large enough, retail enough, or dependent enough on clients who cannot meet the covered client test, or product-diverse enough that the Agreement and the overseas persons exclusion together cannot carry it, or where a UK-facing brand and local booking are commercially necessary in themselves. Where the UK book is wholesale and high net worth business in covered instruments, a subsidiary is usually an expensive way to buy something the Agreement already provides.

There is a sequencing point that is easy to get wrong. The bar on holding a Part 4A permission for the same service, instrument and client category that has been notified applies to the Swiss legal entity itself, not to its group. It therefore constrains a branch, which is the same legal person, and not a separately incorporated UK subsidiary. A group that builds a subsidiary is free to hold overlapping categories in both places, but it should still decide deliberately which clients and products are booked where, because the two entities carry different regulatory obligations and the public register entry should match how the business is run. On the branch route the boundary is a legal requirement, and drawing it while the authorisation application is still a draft is materially easier than varying permissions afterwards.

Termination and the treatment of existing business

A book built solely on the Agreement rests on a treaty that either party can bring to an end, and the timetables are short by the standards of a client franchise. There are two distinct mechanisms and they should not be conflated.

Recognition can be withdrawn for a covered sector or part of one through a notice procedure. A notice of intent to withdraw is followed by consultations, and a notice of cessation may only be issued 90 days after the notice of intent, or from the conclusion of those consultations if earlier. The date from which recognition ceases must fall not less than 90 days after the notice of cessation, and the notice or its details are published in the interest of transparency. The only hard floor is 90 days from the notice of cessation. Measured from the notice of intent, the timetable reaches about six months only where consultations occupy the full 90 days; if they conclude sooner, the notice of cessation may issue sooner and the whole sequence can run to little more than three months. Separately, the Agreement may be terminated by joint agreement on a date the parties agree, or by denunciation by one party, taking effect twelve months after the other party receives written notification.

The Agreement does provide for an orderly exit, and its wind-down provision survives termination. On any of those triggers the parties are to enter consultations within 10 days with a view to establishing wind-down arrangements, to be concluded within 30 days unless otherwise agreed, and they may consult affected suppliers. Where private parties have entered into arrangements in reliance on measures giving effect to the Agreement, its provisions continue to be effective in accordance with those wind-down arrangements or, absent agreement, the dates and terms specified in the notice of cessation or determined by the host party.

On the UK side, SI 2025/1145 already contains a domestic wind-down regime: where recognition is withdrawn for a registered service, a prohibition or restriction is imposed, or the Agreement is terminated, and the article 72ZA exclusion consequently falls away, a Swiss firm not established in the United Kingdom becomes an exempt person for regulated activities necessary to perform contracts entered into before that day, for up to five years (regulations 21 to 25 and 37), subject to notification to the FCA and PRA, notices to counterparties, and the regulators' power to vary or cancel the exemption. The FCA's power to impose prohibitions and restrictions sits alongside it.

None of this is alarming in itself, and nothing suggests either party intends to use it. The planning point is the combination: a withdrawal route that can run from roughly three to six months from first notice, twelve months on denunciation, treaty-level wind-down terms negotiated only after the trigger, with the domestic run-off exemption as the statutory floor, and a joint review of the Agreement's implementation under Article 46, which, unless the Parties agree otherwise, falls five years after entry into force, so from January 2031, and every five years thereafter. A firm whose entire UK franchise depends on a register entry should know what it would do inside that window. A firm that also holds a branch or a subsidiary has a head start on the answer, provided the UK entity's permissions can absorb the registered book or be varied in time. This belongs on the board risk register.

An interpretive point on cross-references to UK law

One provision in the main agreement cuts across the whole structure. Unless otherwise specified, references in the Agreement to the domestic laws of the parties refer to the domestic laws in force at the date of signature, 21 December 2023. Read literally, that sits awkwardly beside the client categories in Annex 5, which are expressed as per se professional clients and eligible counterparties as defined under the domestic law of the United Kingdom, and beside the instrument list, which is likewise defined by reference to UK law.

The question is whether those cross-references track UK law as it changes or as it stood at signature, and the words unless otherwise specified leave room for argument in both directions, particularly since the Agreement also sets out the categories in its own text. The UK implementing regulations do not settle it: they define the Agreement as the treaty as amended from time to time, which concerns amendments to the treaty itself and says nothing about the domestic-law cross-references. And because the Agreement confers no rights on private parties and cannot be invoked directly in either legal system, the operative question for a firm is how a UK court would read the implementing regulations, which pick up the Annex 5 categories by reference.

We are not aware of published guidance from either supervisor resolving the point, and it is not one to resolve by assumption. For a firm classifying clients today the conservative course is to satisfy the treaty list and the current Handbook definitions together, which is achievable in almost every case, and to document that both were considered. Where a UK definition has moved since December 2023 in a way that would change an outcome, that is a question for advice; a policy assumption will not carry it.

The five questions that decide it

The analysis collapses into five questions, best answered in this order.

1. Who are the UK clients? If they are per se professional clients, eligible counterparties, or individuals and private investment structures that meet the full Annex 5 high net worth test (net assets above GBP 2,000,000, an assessment of capability, a signed declaration, a written warning and a separate statement on lost protections, and consent to disclosure to UK regulators), the Agreement reaches them. If clients outside those categories matter commercially, no structuring inside the Agreement will help; unless an exclusion such as the overseas persons exclusion covers the specific activity, which is an activity-by-activity question, the business needs a UK Part 4A permission, through a branch or a subsidiary.
2. What instruments and services does the book need? Deposits, insurance-based products, structured deposits and anything else outside the closed instrument list fall away at once; a structured product survives only where it is itself a transferable security or a derivative as defined under UK law. Ancillary services may be supplied on a standalone basis, which matters for custodians and research providers.
3. Where must the people sit? Client-facing staff based in London point to a branch or a subsidiary and away from the Agreement, because deference stops at the branch and covers only temporary presence that is not a permanent establishment. Staff in Zurich who travel to clients point the other way.
4. How much of the group's revenue would depend on the register entry? The higher the concentration, the more the termination timetable matters, and the stronger the case for holding a second channel even where it is not commercially necessary today.
5. What is the tax and permanent-establishment position? A UK branch or a London-based team raises UK corporation tax, transfer pricing and permanent-establishment questions that sit outside this note and need confirmation from UK tax advisers before a structure is chosen.

What this means for you

• Identify the business outside BFSA coverage before choosing a structure. List the UK business the Agreement cannot reach, by client, instrument and activity. The shape of that list decides whether a branch or subsidiary is justified; the size of the UK book does not.
• Do not treat the overseas persons exclusion as a safety net. It is transactional, it turns on a legitimate approach defined by reference to the financial promotion restriction, and it was amended twice between January and April 2026. It suits reverse-solicited and intermediated business; a marketing-led UK strategy has to be built exemption by exemption.
• Understand that a branch does not widen BFSA access. It is a parallel channel the Agreement forbids from carrying the registered business, with a booking model and documentation split to maintain, and for banks the PRA now expects new branches to focus primarily on wholesale activity.
• Draw the Part 4A boundary before authorisation. The Swiss entity cannot hold a UK permission for the same service, instrument and client category it has notified. That bites on a branch; a separately incorporated subsidiary is outside it, so decide which categories sit where while the application is still a draft.
• Put both termination timetables on the risk register. Roughly three to six months from first notice on the withdrawal route, twelve months on denunciation, with wind-down terms negotiated after the trigger. Know what the firm would do in that window before it opens.

Isak Legal advises Swiss and UK financial institutions on cross-border market access and structuring, including BFSA perimeter analysis, branch and subsidiary decisions and the documentation that has to sit behind either. See our Financial Regulation, Market Entry and United Kingdom pages, or get in touch.

This client update is provided for general information only, reflects the position as at 27 September 2026 and does not constitute legal advice or create a lawyer-client relationship. It does not address tax, and the permanent-establishment and corporation tax consequences of a UK presence require separate advice. Perimeter limits, withdrawal, termination and wind-down provisions are taken from the Agreement text; the deference and conditions detail from the guidelines published by the FCA and the PRA and by FINMA, which are not binding and are updated from time to time; article 72 of the Regulated Activities Order from the consolidated text on legislation.gov.uk, which records amendments in 2026 and further changes that may be brought into force; and the branch expectations from the April 2026 version of PRA supervisory statement 5/21, which applies to PRA-authorised banks and PRA-designated investment firms only. Verify the current texts before acting. For advice on a specific matter, please contact us.