LONDON (Reuters) – Plans by Britain and the European Union to set up a new financial cooperation forum by the end of March have made some progress but this will not automatically lead to market access, senior officials said on Tuesday.
Britain’s trade deal with the EU that came into effect when it left the single market on Dec. 31 does not cover financial services, leaving the City of London largely adrift from its biggest export market. Trading in euro denominated shares and swaps has already left London for the EU and New York.
A forum for financial regulators from Britain and the EU to exchange views would help to improve relations. A forum has already been set up for EU and U.S. market watchdogs.
“We are in the process of exchanging texts and looking at that, and in due course we will come to a resolution,” John Glen, Britain’s financial services minister, told an insurance conference on Tuesday.
Separately, Mairead McGuinness, the EU’s financial services commissioner, said “informal engagements” regarding a memorandum of understanding on regulatory cooperation were now taking place.
“Once we agree on our working arrangements, we can turn our attention to resuming our unilateral equivalence assessments,” McGuinness, speaking at an online event at the European Parliament, said.
Glen said the EU’s equivalence assessments would not be part of the MoU. “That is a process we can’t control,” he said.
The EU can grant direct market access for foreign financial services companies if it deems their home market rules to be equivalent or aligned closely enough to the bloc’s own regulations.
Julian Adams, director of public policy and regulation at insurer M&G, said Brexit offers Britain an opportunity to have “fit for purpose” insurance capital rules.
“My priority would be to get that right, not to focus on equivalence per se, because I think if you don’t do that you are allowing yourselves to be dictated to essentially by European policy setting the agenda,” Adams told the insurance conference.
The EU has only granted two temporary equivalence decisions for clearing and settling trades for Britain.
“We consider our interests and will only take equivalence decisions that are in the EU’s interests. There cannot be equivalence and wide divergence,” McGuinness said.
(Reporting by Huw Jones; Editing by Jane Merriman and Richard Chang)
