Photographer: Niklas Halle’n / AFP / Getty Images
Photographer: Niklas Halle’n / AFP / Getty Images
The UK will begin talks with the European Union this week on how regulators will cooperate on financial services now that Brexit has been completed.
The financial services industry was largely excluded in the trade deal with the bloc by Prime Minister Boris Johnson just before Christmas, but the two sides agreed to conclude a memorandum of understanding on regulatory cooperation by March.
“We want to maintain financial stability, market integrity and investor and consumer protection,” Johnson spokesman Jamie Davies said Tuesday. “We have been pushing for a broader financial services agreement as part of the negotiations, and the Treasury will continue that work with the commission starting this week.”
How it holds the key “equivalence” for post-Brexit banking: QuickTake
The end of the Brexit transition agreements last month threatens London’s dominant position in financial services, which accounts for about 7% of UK economic output. Chancellor of the Prosecutor Rishi Sunak and Economic Secretary of the Treasury John Glen will both be involved in the talks, the government said.
The Memorandum of Understanding is intended to set out the framework for regulatory cooperation to allow for “bilateral exchanges of views and analysis on regulatory initiatives and other issues of interest”, according to joint statement in December.
It also seeks to establish a process for determining the adoption, suspension and withdrawal of so-called “equivalence” decisions. This process, which is separate from the MOU talks, involves the two sides accepting their rules as strict as the others, allowing banks and other financial companies to do business smoothly across borders.
Equivalence decisions
The United Kingdom is seeking these equivalence decisions unilaterally issued a set of its own decisions last year to allow EU financial institutions to continue operating in the UK.
A comprehensive agreement would help keep London the center of EU funding, but this may not be the bloc’s priority. There has long been a desire for more financial infrastructure to serve the economies of the EU and the euro area in the Member States.
Officials from the bloc of 27 nations stressed on Monday that the EU will not rush to assess the UK’s plans to regulate its financial sector and stressed that granting market access remains a unilateral decision that is not being negotiated.
Read more about eu position
The EU agreed two major equivalence decisions to the UK in 2020 – but with 28 areas still open, it is unclear how much investment banking can remain in the UK.
The first days of Brexit have already revealed the stakes with London the loss of EUR 6.3 billion in daily share transactions to EU headquarters on 4 January, the first working day after the transition period.
– With the assistance of Silla Brush, Alexander Weber and Harry Wilson
(Updates with details on equivalence discussions throughout.)