EU threatens to cut off the City unless it gets post-brexit clarity
BRUSSELS could refuse the City of London access to the EU’S market from next year, unless the UK sets out its plans to diverge from the bloc’s financial rules.
Mairead Mcguinness, an Irish centre-right MEP, is the candidate to be the EU’S financial services commissioner. If approved by the European Parliament, she will be the gatekeeper between the single market and the Square Mile.
The Fine Gael politician and former member of the parliament’s Brexit steering group, told MEPS at a hearing into her candidacy that Brussels needed answers from the UK. “[ We’re] trying to get from the UK an idea of their vision for their financial services sector,” she said. “We know they plan to diverge.”
Equivalence is the system of regulatory recognition that will govern UK financial services in the EU after the end of the Brexit transition period on Dec 31. It replaces the EU “passport” UK firms and those in EU member states enjoy.
Ms Mcguinness, 61, said: “Unless and until we get clear answers from the UK about their intentions to deregulate, it will be difficult to grant equivalence.
“Deal or no deal, the trade in financial services between the EU and the UK will be different as of Jan 1,” she said.
Equivalence can be unilaterally withdrawn by the European Commission with as little as 30 days’ notice. British negotiators tried to convince the EU to introduce more consultation in the process during the trade negotiations with Brussels, but with no success.
London i s Europe’s major financial hub. The commission has granted equivalence so that EU companies can continue using London clearing houses from Jan 1. It sees this as important for financial stability in the bloc.
“We need to avoid being dependent on a third [non-eu] country for key financial services,” Ms Mcguinness told MEPS, before calling for the bloc to build up its financial infrastructure.
Brussels is anxious about the risk of London undermining its rules in the future. “I want to make sure that we have a strong European financial system, and that the services that underpin our financial stability are under our supervision,” Ms Mcguinness said.
EU states have pushed back in the past on more common supervision in markets, fearful of losing more regulatory sovereignty. The Wirecard collapse has prompted the European Commission to revisit the question.
Ms Mcguinness said it took investigative journalism to uncover the €1.9bn (£1.7bn) hole in the balance sheet of now the collapsed German payments company. “The Wirecard scandal is a shocking tale of fraud and failure of supervision,” the MEP said.