Britain and EU close to agreeing forum for financial services

Britain and the EU are poised to agree a new “talking shop” for co-operation on financial services, but the deal will still leave the City of London facing major barriers to trade with the 27-member bloc.

The two sides are closing in on an agreement on a memorandum of understanding for their future relationship on the financial sector, aimed at creating “a stable and durable” basis on which to build co-operation.

Mairead McGuinness, EU financial services commissioner, said at the weekend she was “very hopeful” the memorandum would be agreed imminently. “There’s good news on that front,” she told the BBC’s Andrew Marr show. The commissioner is due to assess progress with Bank of England governor Andrew Bailey in a meeting on Monday.

The Treasury declined to comment, but UK officials hope the new framework for talks between regulators in London and Brussels will be signed off, on schedule, this month.

After several months of acrimonious post-Brexit exchanges between the two sides on a range of issues — from Northern Ireland to vaccines — the creation of a forum for talks on financial regulation and supervision will be seen as a minor step forward.

We will not be recreating the conditions of the single market for the UK because the UK chose to leave.

McGuinness said the two sides were “working really well together”, but the new dialogue arrangements — similar to the ones Brussels has with the US — will not in themselves settle sensitive issues of market access for the sector.

“It’s not a substitute for a relationship built on trust,” said Miles Celic, chief executive of The City UK lobby group. “There’s not much point if it’s a forum for people to shout at each other.”

In particular, the EU appears to be in no hurry to grant “equivalence” status to British financial services rules, a designation that would allow UK firms more direct access to the bloc’s customers.

Some in the City of London believe Brussels will never grant full equivalence, while Andrew Bailey, Bank of England governor, has warned that Britain would never sign up to being a “rule-taker” from Brussels.

Jonathan Hill, the UK’s former financial services commissioner to the EU, told the FT in January that Brussels would not do Britain any favours: “Given that their strategy is to build up the EU, why on earth would they?”

The City UK has called the new regulatory forum planned in the draft memorandum of understanding a “talking shop”. Its remit — set out as part of the EU-UK trade deal — would include discussions on preserving financial stability, market integrity and protecting investors and consumers.

It will also consider “how to move forward on both sides with equivalence determinations between the [EU] and the UK without prejudice to the unilateral and autonomous decision-making process on each side”.

But EU officials have made clear that those decisions would remain firmly in Brussels’ gift, and that it is still reflecting on what market access arrangements would be appropriate.

McGuinness said: “We will not be recreating the conditions of the single market for the UK because the UK chose to leave.”