Photographer: Niklas Halle’n / AFP / Getty Images
Photographer: Niklas Halle’n / AFP / Getty Images
The UK will be negotiating with the European Union this week on how financial services regulators will work together as Brexit is completed.
The financial services industry was largely sidelined in the trade agreement that Prime Minister Boris Johnson signed with the bloc just before Christmas, but the two parties agreed to market a memorandum of understanding on regulatory cooperation by March.
“We want to preserve financial stability, market integrity and the protection of investors and consumers,” Johnson spokesman Jamie Davies told reporters on Tuesday. “We have insisted on a broader agreement on financial services as part of the negotiations, and the Treasury will continue with the commission this week.”
How ‘equivalence’ is the key to post-Brexit banking services: QuickTake
The end of the Brexit transition arrangements last month threatens the City of London’s dominant position in financial services, which account for about 7% of UK economic output. Chancellor Rishi Sunak and Economy Minister John Glen will both be involved in the talks, the government said.
The MOU is intended to set the framework for regulatory co-operation to ‘bilateral exchange of views and analysis on regulatory initiatives and other matters of interest’, according to a joint statement in December.
It also seeks to establish a process for determining the acceptance, suspension and revocation of so-called “equivalence” decisions. This process, which is separate from the MOU talks, involves the two parties accepting that their rules are just as strict as each other, allowing banks and other financial companies to do business seamlessly across borders.
Equivalence decisions
It is these equality statements that the United Kingdom strives for last year unilaterally issued a set of its own decisions to enable EU financial institutions to continue working in Britain.
A comprehensive agreement would help preserve London as a hub for EU finances, but that may not be the bloc’s priority. It has long wanted to be more about the financial infrastructure that the EU economies and the euro area have based in member states.
Officials from the bloc of 27 countries stressed on Monday that the EU would not emphasize its assessment of the UK’s plans to regulate its financial sector and underlined that granting market access remains a unilateral decision not not.
Read more about the EU se attitude
The EU granted two major equivalence decisions with the UK in 2020 – but with 28 areas still open, it’s unclear how much investment banking services can remain in the UK.
The early days of Brexit have already exposed the game, with London on 4 January, the first working day after the transition period, 6.3 billion euros in daily shares were traded to EU sites.
– With the help of Silla Brush, Alexander Weber and Harry Wilson
(Updates with detail on equivalence talks throughout.)