Photographer: Niklas Halle’n / AFP / Getty Images
Photographer: Niklas Halle’n / AFP / Getty Images
The UK will begin talks with the European Union this week on how regulators will work together on financial services now that Brexit is complete.
The financial services industry was largely sidelined in the trade deal that Prime Minister Boris Johnson struck with the bloc just before Christmas, but the two sides agreed to negotiate a memorandum of understanding on regulatory cooperation by March.
“We want to maintain financial stability, market integrity and investor and consumer protections,” Johnson spokesman Jamie Davies told reporters on Tuesday. “We pushed for a broader agreement on financial services as part of the negotiations, and the Treasury will continue that work with the committee starting this week.”
How ‘equality’ is the key to post-Brexit banking: QuickTake
The end of the transitional Brexit arrangements last month threatens the City of London’s dominant position in financial services, which accounts for about 7% of the UK’s economic output. Treasury Secretary Rishi Sunak and Economic Treasury Secretary John Glen will both be involved in the talks, the government said.
The MOU aims to establish the framework for regulatory cooperation to enable “bilateral exchange of views and analysis on regulatory initiatives and other important issues,” said one joint statement in December.
It also aims to establish a process for the adoption, suspension and withdrawal of so-called “equivalence decisions”. This process, which is separate from the MOU talks, means that the two sides accept that their rules are as strict as each other, allowing banks and other financial companies to conduct business seamlessly across borders.
Equivalence Statements
It is these equivalence statements that the UK is striving for last year unilaterally issued a series of its own decisions to allow EU financial institutions to continue to operate in Britain.
A comprehensive agreement would help preserve London as a hub for EU funding, but that may not be the bloc’s priority. There has long been a desire to have more financial infrastructure for the EU and eurozone economies in the member states.
Officials from the 27-country bloc stressed on Monday that the EU will not rush its assessment of the UK’s plans to regulate the financial sector and underlined that granting market access remains a unilateral decision that cannot be negotiated.
Read more about the EU’s 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 can remain in Britain.
The early days of Brexit have already laid bare the stakes, with London loss of € 6.3 billion in daily share transactions to EU locations on January 4, the first business day after the transition period.
– With help from Silla Brush, Alexander Weber and Harry Wilson
(Updates with details on equivalence discussions.)