City lobbies for bespoke Brexit deal.

Over the weekend, prospects have been raised in London that a bespoke Brexit deal on financial services may be reached with the EU. Several national UK newspapers have reported on the possibility of “mutual recognition” of regulations to maintain the City of London’s access to the European Union.

The UK Chancellor, Philip Hammond is apparently about to propose a process which allows British and EU financial services firms to trade freely, but significantly will enable the UK to set its own laws. The aim is to ensure financial regulations across Britain and the UK are based on the same principles, “so even as precise rules diverge after Brexit the laws in each market have similar effects”.

The proposed system requires co-operation between policy makers and regulators if the process is to succeed. It is proposed that an independent tribunal would be put in place to resolve any disputes.

Last month, a UK parliamentary committee issued a detailed report which called a Brexit deal between the UK and EU to provide financial services institutions with "mutual market access".

The House of Lords European Union Committee said that the UK government should not accept a future relationship where the UK relies on a designation from the EU that the UK's financial services framework is 'equivalent' to that of the EU.

The Financial Times, who were first to break the story quote Miles Celic, chief executive of TheCityUK, who said he would be “very pleased” if the plan was adopted. “The starting point for all our companies is, how do we look after our customers on March 29 next year? Beyond that, it is about how to maintain London as an international financial centre, not just for the benefit of the UK but also for the benefit of Europe and international clients around the world. Mutual regulatory recognition allows for that.”

Stephen Jones, chief executive of UK Finance, is also quoted saying: "Including an ambitious framework for trade in financial services in any future agreement is in the interests of both sides. Through mutual recognition, closely aligned standards and supervisory cooperation, we can preserve some of the benefits of market access without sacrificing regulatory autonomy".

The big question is whether the EU is likely to accept the plan? Last December, the EU’s chief negotiator, Michel Barnier, cautioned that it would be difficult to make a deal on financial services as it has never been done before. He said "There is not a single trade agreement that is open to financial services. It doesn't exist."

 

 

 

Dr. Ray NultyComment