The UK and the European Union are getting closer to reaching a co-operation agreement on financial regulation by the end of this month, a step that could give London companies greater access to the single market.
The EU could grant the UK so-called partial regulatory equivalence for some financial products once a separate memorandum of understanding on financial regulation is reached, according to someone familiar with the negotiations.
While the two are formally separate, providing a common framework around certain financial services rules could help unblock limited equivalence decisions that would allow British firms access to the wider EU market, the caller said. not be identified to discuss private matters. The EU and the United Kingdom will retain their unilateral right to grant or withdraw these equivalence decisions.
The two sides negotiated a memorandum of understanding on regulatory cooperation in the field of financial services in January. The latest draft now includes requests for both parties to keep each other informed about their tax plans for the financial industry, as well as their efforts to combat money laundering and terrorist financing, according to a separate person familiar with the matter.
“We are in a good place around the memorandum of understanding,” Mairead McGuinness, the bloc’s commissioner for financial services, said while speaking to a group of journalists in Brussels on Wednesday.
The European Commission and the United Kingdom Treasury declined to comment on the ongoing negotiations.
Nothern Ireland
While discussions on the Memorandum of Understanding are on track, ongoing disagreements around Northern Ireland are escalating post-Brexit tensions, which could have an impact on equivalence decisions, another The EU official said this week. A dispute over Vaccine supply has also increased tensions between the two sides.
The Memorandum of Understanding, which is expected to be agreed by the end of this month, calls for a joint forum to discuss regulations and exchange information and includes provisions for informal consultations on decisions to adopt, suspend or withdraw equivalence.
This separate process of equivalence has been fractured so far. Britain has become increasingly frustrated by the EU’s reluctance to grant decisions that would allow London-based funding firms to operate en masse, while Brussels has worried about the UK’s proposed reforms to its financial regulation. The lack of an agreement has jeopardized London’s dominance of European finances for decades.
Read more about equivalence
McGuinness said at a conference on Tuesday that equivalence decisions would be resumed once a memorandum of understanding was implemented. She stressed that the process is separate and based on the UK’s alignment with the bloc’s rules.
“Once the regulatory cooperation framework is in place, we will resume assessing equivalence with the UK authorities,” she said. “But let me clarify two issues: first, there can be no equivalence with a wide regulatory divergence. Secondly, we will grant equivalence only when it is in the EU’s interest – just as the UK has made its own equivalence decisions in their own interest “.
However, the possibility of limited equivalence is an echo of the comments made last month by Frenchman Clement Beaune, the European affairs minister.
“There will probably be a partial equivalence, probably by the end of the semester,” Beaune said in a February interview, stating that it would be “revocable, provisional, unilateral on the part of the EU”.
– With the assistance of Ian Wishart, Silla Brush and Aoife White