UK official: UK, EU close to Brexit deal on financial services
LONDON: The United Kingdom and the European Union have made progress on a deal to give London’s dominant financial centre basic access to EU markets after Brexit, two British officials said, but no agreement has yet been clinched.
The deal being discussed would be based on the EU’s existing system of financial market access known as ‘equivalence’ – a watered- down relationship that officials in Brussels have said all along is the best arrangement that Britain can expect.
The Times newspaper said a tentative deal had been reached on all aspects of a future partnership on services, as well as exchange of data and including what would amount to a concession from the EU on bending the ‘equivalence’ rules. Officials in Brussels and London said The Times report was wrong.
“We are making progress,” a British official, who spoke on condition of anonymity, told Reuters.
A second British official said that, while there was progress, nothing was finalised. A spokesman for Prime Minister Theresa May said reports of a deal were speculation and that Britain wanted to go beyond the existing equivalence regimes.
The European Commission said a future financial services agreement would only be discussed after a Brexit divorce deal has been finalised. Talks over a broader deal are mired in a disagreement over an Irish backstop – an insurance policy to ensure there will be no return to a hard border on the island of Ireland if a future trading relationship is not in place in time.
Many top bankers fear Brexit will slowly undermine London’s position as the world’s biggest international financial centre, and a Reuters survey found that, so far, just over 600 are moving away. Global banks have already reorganised some operations ahead of Britain’s departure from the European Union, due on March 29.
The pound jumped following The Times report, reaching US$1.2905 by 1150 GMT and extending gains after the Bank of England hinted at a slightly faster pace of interest rates increases.
But BoE Governor Mark Carney also warned all bets were off if next March brought a ‘disruptive’ EU departure. Britain is currently home to the world’s largest number of banks and hosts the largest commercial insurance market.
About six trillion euros ( US$ 6.8 trillion) or 37 per cent, of Europe’s financial assets are managed in the UK capital, almost twice the amount of its nearest rival, Paris.
In addition, London dominates Europe’s 5.2 trillion euro investment banking industry. New York is bigger, but more centred on American markets. Since Britain voted to leave the EU in 2016, some of the world’s most powerful finance companies in London have been seeking ways to preserve the existing cross-border flow of trading.
The arrangements being discussed fall far short of that. Currently, inside the EU, banks and insurers in Britain enjoy unfettered access to customers across the bloc in all financial activities.
Equivalence covers a more limited range of business and excludes major activities such as commercial bank lending.
Britain’s aim for financial services was “to go beyond existing EU equivalence regimes and agree a new economic and regulatory partnership,” a spokesman for May said.
“This would be based on the principle of autonomy for each side over decisions regarding access to its market.” Under the current system, Brussels can scrap an equivalence designation within 30 days in some cases – a step it has never taken – and Britain has called for a far longer notice period. — Reuters