LONDON – The UK and the European Union have yet to find a solution for the financial services industry after Brexit, and recent data suggests that Brussels could have the advantage of negotiations.
It was a key topic of debate after the UK voted to leave the European Union in 2016. The city of London, the UK’s business district, wants access to the European market, as it is a significant part of its business. On the other hand, the city is also a vital source of funding for European businesses.
However, Brexit has inevitably changed this relationship. By leaving the EU, the UK has lost access to the free flow of people, goods and services to the EU and this is affecting the way financial services work.
European financial centers, rivals London, benefited in the weeks after the UK ended EU rules on 31 December. The Dutch capital Amsterdam, for example, has seen an increase in the number of transactions it records. A piece of euro-dominated financial products has also been completed outside London.
“The change in the trading of shares on behalf of the EU listed in the UK from the UK to the Netherlands has certainly been unprecedented in its size and the fact that it all happened overnight on January 4. But it was not unexpected,” said David Howson. chairman of the pan-European stock exchanges CBOE Europe, he told CNBC’s “Squawk Box Europe” on Wednesday.
The EU and the UK agreed to work on their relationship with financial services in early 2021. However, there is a widespread view that Europe will not recognize UK rules as equivalent to their own, which would constrain the ability of UK firms to trade more freely en bloc.
“I see no likelihood of concluding an equivalence agreement,” Howson said.
“There is certainly no incentive for the European Commission and ESMA (European Securities and Markets Authority) to seek to ensure equivalence, given the trading share that has now moved, as I said, quite permanently in Europe,” he said. he added.
The Governor of the Bank of England, Andrew Bailey, said earlier this month that it would be a “mistake” if the EU decided to block the city of London in any way.
“The EU has said it needs to better understand how the UK intends to change or change the rules that follow. This is a standard that no other country has,” Bailey said in a statement.
However, the EU argues that without understanding how the UK will proceed with financial regulation, it cannot recognize them as equivalent to their own.