Britain and the European Union are getting closer and closer to reaching a cooperation agreement on financial regulation by the end of this month, a measure that can help give companies in the city of London more access to the single market.
The EU could grant the United Kingdom so-called partial regulatory equivalence for some financial products, once the separate memorandum of understanding on financial regulation is reached, according to a person familiar with the negotiations.
Although the two issues are formally separate, ensuring a common structure around certain financial services rules could help unlock some limited equivalence decisions, allowing UK companies access to the broader EU market, said the person, who asked so as not to be identified discussing private matters. The EU and Britain would maintain their unilateral right to grant or withdraw these equivalence decisions.
The two sides have been negotiating a memorandum of understanding on regulatory cooperation in financial services since January. The latest draft now includes calls for both sides to stay informed about their tax plans for the financial sector, as well as efforts to combat money laundering and terrorist financing, according to a person familiar with the matter.
“We are fine with the memorandum of understanding,” said Mairead McGuinness, the bloc’s commissioner for financial services, speaking to a group of journalists in Brussels on Wednesday.
The European Commission and the UK Treasury declined to comment on the ongoing negotiations.
northern Ireland
While MOU negotiations are underway, continued disagreements around Northern Ireland are heightening post-Brexit tensions, which may impact equivalence decisions. EU authority said this week. A dispute over the supply of vaccines has also increased tensions between the two sides.
The MOU, which is due to be agreed by the end of this month, calls for a joint forum to discuss regulations and share information and includes provisions for informal consultations on decisions to adopt, suspend or withdraw equivalence.
This separate process of equivalence has been turbulent until now. The UK is increasingly frustrated by the EU’s reluctance to grant rules that would allow London-based financial companies to operate in the bloc, while Brussels is concerned about the reforms proposed by the UK in its financial rules book. The lack of agreement has put London’s longstanding dominance in European finances under threat.
Read more about equivalence
McGuinness said at a conference on Tuesday that decisions on equivalence will be resumed as soon as a memorandum of understanding is in place. She emphasized that the process is separate and depends on the UK’s alignment with the bloc’s rules.
“As soon as the regulatory cooperation framework is in place, we will resume assessing equivalence with UK authorities,” she said. “But let me clarify two points: first, there can be no equivalence with wide regulatory divergence. Second, we will grant equivalence only when it is in the EU’s interest – just as the UK has made its own equivalence decisions in its own interest. “
Still, the possibility of limited equivalence echoes comments made last month by Frenchman Clement Beaune, junior minister for EU affairs.
“There will probably be partial equivalence, probably at the end of the semester,” said Beaune in February interview, noting that it would be “revocable, provisional, unilateral by the EU”.
– With the help of Ian Wishart, Silla Brush and Aoife White