London — The EU is in no rush to reopen its doors to the British finance industry, dashing any remaining hopes that the Brexit trade deal would unlock market access for banks and other finance firms.
Officials from the 27-nation bloc stressed on Monday that the EU won’t hasten its assessment of the UK’s plans for regulating its financial sector and underlined that granting market access remains a unilateral decision that’s not up for negotiation.
The industry was mostly left out of the free-trade agreement the two sides struck late in 2020. Relations now hinge on a process known as equivalence, where each side grants market access if the other’s rules are seen as tough enough. Until that’s settled, UK firms will have to rely on bases in Frankfurt, Paris and other EU cities to keep doing business with clients there.
“Equivalence requires a certain degree of alignment. But that degree of alignment needs to be discussed and agreed area by area,” Almoro Rubin de Cervin, the person in charge of international relations at the European Commission’s department for financial services, told a European parliament committee on Monday. “Equivalence as a process will take a while.”
While the UK started life outside the bloc on January 1 with an almost identical set of rules, officials are contemplating changes in a number of areas. Bank of England governor Andrew Bailey has said the UK should not be tied to EU standards as the price for winning market access.
As a first step, the UK and the EU are working on ground rules for co-operation in financial services by March. But officials in London should not confuse this with a negotiation on market access, Rubin de Cervin warned, adding that the planned memorandum of understanding (MOU) won’t constrain the EU in its decision-making.
If the distance between the two sides is not significant, the deadline to reach an accord is “definitely achievable”, according to the official. “But if the UK would come to the table on the MOU with excessive demands, for instance in terms of constraints on decision-making, then it would take longer.”
Since the UK voted to leave, the EU has taken a tough line on financial services, disregarding several proposals on how to enhance co-operation beyond its standard framework for dealing with firms outside the bloc.
“There is no parallel negotiation on financial services. The deal is done,” France’s junior minister for EU affairs, Clement Beaune, said in a Bloomberg TV interview on Monday.
“There is a unilateral framework of equivalence in the hands of the EU. Now we will be looking, it’s our analysis to be done, at the financial regulations of the UK markets to see whether we think they are protective enough, regulated enough, to give on an ad-hoc, unilateral basis access or not to our market.”
The UK lost about €6bn in daily share trading on the first business day after the Brexit transition period, adding impetus to those voices demanding to ease rules and help the City get a competitive edge over European rivals. One such move came when the UK treasury said it plans to allow trading in Swiss shares, reversing an EU ban on the activity.
The EU is also mulling changes to its rules, making assessments of alignment more complex. “To some extent – and that’s part of the difficulties going forward – we will be two moving targets,” Rubin de Cervin said.