Post-Brexit financial services pact with the EU ‘coming this month’
A financial services cooperation pact between Britain and the EU is expected before the end of the month, which would see the blocs able to cooperate more closely on financial services regulation in a post-Brexit world.
Britain’s financial services industry has been largely cut off from the EU, its biggest customer, since the Brexit transition period ended on 31 December as the sector is not covered by the UK-EU trade deal.
Katharine Braddick, director general of financial services at the Treasury, said both sides were committed to agreeing an memorandum of understanding (MoU) on regulatory cooperation by the end of March.
“I don’t see any reason why we are not going to be able to deliver on that commitment,” Braddick said, echoing comments this week from the EU.
Braddick said talk about the pact has been “exuberant” and in practice it would only be an “administrative vehicle” for dialogue.
A person familiar with Britain’s negotiating position said the UK’s focus is on making sure the MoU provides transparency and appropriate dialogue when it comes to adopting, suspending and withdrawing regulatory decisions.
Brussels can grant direct market access for foreign financial services firms if it deems their home market rules are similar to the EU’s own standards, a designation known as equivalence.
Many Canada figures have gone on record to say the pact will not provide the UK renewed access to EU markets, while the government has consistently played down any chance of equivalence being granted.
Major UK banks sent £1 trillion of assets and thousands of jobs to EU capitals between 2016 and last year in preparation for losing full access to EU markets.
Lobby group TheCityUK is still hoping for the EU to restore at least partial equivalence to British banks.
Last month, TheCityUK chief executive Miles Celic said: “Our industry is pragmatic about the increased friction to trade and cross-border transactions which have resulted from Brexit, but we should still seek to minimise this wherever possible.
“We urge both the UK and the EU to move quickly and get these additional agreements in place.
An early draft for a cooperation agreement in financial services between Britain and the EU faces criticism for having “less substance” than a deal the EU agreed with the United States in 2016.
Under the US deal with the EU, equivalence is treated as “outcomes-based,” which Britain has called for as part of its deal. However, in an early draft of the MoU, there was mention of outcomes-based equivalence in the draft EU-UK memorandum.