Bank of England governor Andrew Bailey has warned that the EU is poised to not grant the UK equivalence and therefore access to its financial markets.
In a Mansion House speech, Bailey pointed out that Brussels is attempting to force Britain to follow tougher rules on finance than those applied to other trading partners such as the US and Switzerland, the Telegraph reports.
What is equivalence?
When the UK left the EU, the trade deal did not cover financial services. The EU, however, granted the UK’s financial services industry a six-month extension to the transition deal, which ended on 31 December.
In the meantime, the UK has been negotiating a deal that would result in both the UK and EU recognising the equivalence of each other’s financial regulatory regime. This would allow UK-based finance companies to continue to operate in the EU.
Although the UK unilaterally recognised EU standards last year, the EU has not reciprocated and negotiations looks set to be protracted.
Without an equivalence deal, companies trading internationally will face higher costs and the cost of finance will rise for consumers, the Telegraph says.
During his speech to the finance industry, the Guardian reports Bailey saying that the EU’s current regulatory demands are “unrealistic”.
He said that the EU had granted equivalence to other countries without the requirement for those countries to follow changes the EU made to its own rules – something it is asking for from the UK.
He said that the EU would not accept such demands if asked to follow them itself.
No to rule-taking
According to the Times, Bailey’s comments are his bluntest yet as he urged the EU not to pick a fight with the UK.
He has previously stated that the UK should not become a “rule taker” and if that was the price of equivalence then it “is the wrong outcome for the UK”.
The news comes as Amsterdam overtook London as Europe’s leading share trading hub, picking up on lost business in the City this year, the FT reports.
An average €9.2bn shares a day were traded on Euronext Amsterdam and the Dutch arms of CBOE Europe and Turquoise in January.
Trade volumes in London fell to €8.6bn, dislodging the UK from its position as the main hub for Europe. Paris and Dublin also benefitted from small increases in trading.
London has looked to offset some of its losses by lifting a ban on trading Swiss stocks, which is in place in the EU.
Analysis by the Centre for Economics and Business Research (CEBR) published by the office of Mayor of London Sadiq Khan, and reported in City AM, shows that London’s financial services sector could lose £9.5bn a year as a result of Brexit.