Chancellor Rishi Sunak has outlined plans to maintain the City of London’s prime position as a financial services hub after the transition period ends on 31 December 2020.
The Treasury this week published a “set of equivalence decisions for EU and EEA member states” which effectively endorses EU regulations and financial supervision in the UK, City AM reports
It is hoped that the decision will provide stability for EU firms operating in the UK, but a reciprocal decision granting UK firms access to European markets has not yet been made.
The European Commission has so far not made a decision on whether to grant the UK the ‘equivalence’ status that would give its firms continued access to European financial markets.
It had been expected that the two sides would be found to have ‘equivalent’ financial regulations – meaning each side’s laws are equally robust for the sector. However, the EU has not yet made its verdict on UK regulations and their supervision.
If it does not do this before the end of the transition period, the UK’s financial services industry will lose access to EU markets on 1 January 2021.
British access to European financial markets is not even currently a topic of discussion in the ongoing UK-EU negotiations, despite the importance of financial services to the UK economy.
UK argues its case
The UK argues that it has provided 2,500 pages of documents proving conformity to European laws.
The government has also published a financial services bill to shape its post-transition regulatory framework.
Regulators including the Financial Conduct Authority have also set out their plans for implementing laws and standards in the sector.
Fears of divergence
However, Europe continues to seek guarantees that the UK will not diverge from European standards at some point in the near future.
Speaking to the FT, a European Commission spokesperson said the UK’s unilateral decision “provides no further clarity on possible divergence from EU rules going forward, or about the UK’s future supervisory practices”.