Deal for City is close, says UK
Minister confident about financial services agreement
The UK is confident it is on the verge of an agreement with the EU to give London’s vast financial centre access to EU markets after Brexit, its financial services minister said on Monday.
The UK is confident it is on the verge of an agreement with the EU to give London’s vast financial centre access to EU markets after Brexit, its financial services minister said on Monday.
Britain’s financial services sector is the biggest source of its exports and tax revenue.
Home to the world’s highest number of banks and the largest commercial insurance market, the City of London and its sister district in Canary Wharf are scrambling to prepare for Britain’s departure from the EU.
The government is looking for an improved form of the EU’s existing system of financial market access, which is known as “equivalence”. It is a basic form of market access dependent on rules being kept broadly similar and is the basis for the EU’s relationship with countries such as the US.
“I am extremely confident we will reach an imminent deal,” minister John Glen told a financial services conference in London. “There is common ground. That is why we are increasingly positive on the expectation of reaching a deal.”
Talks over a broader deal are mired in a disagreement over a 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.
But negotiators are close to agreeing on wording on financial services that would go into a declaration on future relations, which will be included alongside any divorce deal, according to British officials.
Glen said EU politicians are increasingly worried about being cut off from Britain’s financial markets because all the other financial centres in Europe are smaller.
“Severing connections to our financial centre is not in the commercial interests of any other European capital. It’s fair to say the overwhelming majority of European politicians share the same view,” he said.
But Stephen Jones, head of British banking lobby UK Finance, said he is “sceptical” about a financial services deal, saying the actual framework will hinge on broader EU-UK trade negotiations that have yet to start in earnest.
Glen also told the City & Financial conference that dire warnings on hundreds of thousands of jobs leaving the City ahead of Brexit in March have not materialised. “The job losses have not been at the apocalyptic proportions predicted by scaremongerers,” Glen said.
James Bardrick, who heads Citigroup’s UK operation, said he will continue planning for a hard Brexit until Britain agrees a deal. “We have largely done that. We have the arrangements in place that would allow us to continue serving our customers,” Bardrick told the conference.
Britain has done all it can to avoid disruption to financial markets if there is a no-deal Brexit in March, Nausicaa Delfas, the executive director responsible for international issues at Britain’s Financial Conduct Authority, said on the sidelines of the conference. Though the EU has signalled it could act to avoid disruption in derivatives clearing, the bloc needs to do more in case of a no-deal Brexit, such as ensuring financial data can continue to flow across the Channel, she said.
She wants a memorandum of understanding between UK and EU regulators “as soon as possible” so asset managers in London and Edinburgh can continue to operate funds listed in the bloc, a crossborder regime known globally as delegation.
Glen said: “To the asset managers in the room, I want to reassure you that the burning issue of portfolio delegation will be resolved.”
Brexit plans drawn up by the bloc for financial services show reluctance to deal with other areas of potential disruption, such as continuity in insurance contracts and privately traded swaps agreements.