New UK-EU financial services pact remains weak on market access

Huw Jones
·2-min read
FILE PHOTO: The City of London financial district can be seen as a couple take a selfie on the south side of the River Thames, amid the coronavirus disease (COVID-19) outbreak in London

By Huw Jones

LONDON (Reuters) - A financial services cooperation pact agreed by Britain and the European Union to enable regulators to share information forsees two meetings a year and stops short of any substantive reference to market access, a document showed on Tuesday.

Britain left the EU's orbit on Dec. 31, cutting the City of London from its largest export customer.

The pact had not been expected to create a forum for deciding on market access as this will up to Brussels granting "equivalence" for specific financial activities.

But the four-page memorandum of understanding seen by Reuters makes scant reference to access, saying that both sides will "jointly endeavour to pursue a robust and ambitious bilateral regulatory cooperation".

The forum is set to meet "alternately in the EU and the UK at least semi-annually, and whenever the participants consider it necessary."

"Forum activities may include dialogue on the participants' autonomous decisions to adopt, suspend or withdraw equivalence relevant to one or the other side."

UK efforts to strengthen references to equivalence, such as comparing any UK equivalence decisions with past equivalence guidelines from the bloc, were rebuffed by Brussels, a source familiar with the negotiations said.

The language on equivalence is also weaker than for the forum the United States has with the EU.

France, however, has expressed concern that even the final text could constrain EU autonomy in equivalence, the source added.

The financial sector wanted to be able to contribute to the forum's deliberations, but the final text only mentions the use of "experts" subject to prior approval by both sides.

The new forum will promote domestic implementation of internationally-agreed financial rules and share positions on issues ahead of global regulatory meetings.

Peter Bevan, global head of financial regulations at Linklaters law firm, said the pact on its own won't advance the cause of equivalence for Britain.

"But it could be an important step towards a more co-operative relationship, while a failure to reach an MOU by the targeted date of the end of March would almost certainly have had the opposite effect," Bevan said.

Brussels will now begin considering equivalence for Britain but has said that it was in "no rush".

(Reporting by Huw Jones, Editing by William Maclean)