London: Britain and the European Union signed a long-delayed post-Brexit cooperation pact in financial services on Tuesday, but the rapprochement is unlikely to restore EU access for the City of London anytime soon.
The memorandum of understanding on regulatory cooperation was part of Britain’s deal in exiting the European Union but put on ice amid clashes with Brussels over trading arrangements in Northern Ireland, since resolved by the Windsor agreement.
“I think it’s fair to say we have turned a page in our relationship based on the Windsor Framework,” EU financial services chief Mairead McGuinness told a press conference where she and UK finance minister Jeremy Hunt signed the MoU.
The first meeting of the new regulatory forum is due in the autumn, allowing both sides to discuss regulatory changes, international developments or risks to markets, she said.
“We are absolutely delighted on the UK side to be able to sign this memorandum of understanding, we also see it as an important turning point,” added Hunt.
UK and EU financial markets are deeply interconnected, and re-building a constructive, voluntary relationship is of benefit to both sides, Hunt said.
Industry bodies TheCityUK, AFME, Investment Association, UK Finance and the City of London welcomed news that the MoU has finally been signed after a long wait.
“This resolution will support UK financial services to once again engage productively with the EU for the benefit of both our economies,” City of London policy chief Chris Hayward said.
But Etay Katz, a financial services lawyer at Ashurst, cautioned: “Fundamentally, the EU is competing with the UK for financial business and thus we do not expect any meaningful concessions from the EU other than those dictated by self-interest or systemic considerations.” The MoU sets up a forum of treasury, regulatory and European Commission officials, similar to what the EU already has with the United States.
Since Britain’s financial sector lost unfettered access to the EU market of over 400 million people due to Brexit, Brussels has made it clear the MoU will not be a forum for negotiating better access for UK financial services.
To deepen its capital market post-Brexit, the EU is preparing to approve a law that would require banks in the bloc to shift clearing of euro derivatives from London to centres like Frankfurt.
After Brexit, London was overtaken by Amsterdam as Europe’s top share-trading venue as trading in euro-denominated stocks shifted from the UK to the bloc, prompting Britain to reform its rules in a bid to shore up London’s role as a global financial centre.
