Britain’s future access to European Union financial markets must face the challenge of the “weaponisation” of equivalence (meaning access to EU markets), a UK banking official said. “Are you going to be comfortable with building a business model on that?”
ING and BNP Paribas have announced they will move more trading jobs out of London.
“Selling financial services from the UK to EU clients will not be allowed,” BNP Paribas said last week as it announced it would create 400 new jobs in the EU.
Around 330 financial firms had already relocated some business from Britain to the EU, affecting 5,000 staff by October last year, ahead of a short Covid-19 induced pause, said think tank New Financial.
The City of London’s unfettered access to its biggest customer – worth around £26 billion ($34 billion) annually – ended on December 31 when Brexit transition arrangements expired.
While London is expected to remain Europe’s biggest financial centre with trillion-dollar foreign exchange trading and derivatives clearing staying put for now, recent moves by the EU to limit other trading activities to within the bloc have dashed the finance industry’s hopes of a wider agreement.
Central to the argument is whether Brussels deems UK financial rules “equivalent” or aligned with the EU’s. Britain says this should be straightforward given both sides have the same rules at the outset.
But last month Brussels said it wouldn’t allow banks in London to offer wholesale investment services to EU investors, piling pressure on the City to shift more activity to continental hubs.
“Firms need to carry on doing their ‘no deal planning’…it will make cross border business outwards from the UK dependent on country by country analysis and so complicated,” said Jonathan Herbst, a financial services lawyer at Norton Rose Fulbright.
All three have opened EU hubs as insurance, with final decisions on equivalence not expected until a wider free trade agreement that includes fisheries and other sensitive sectors is hammered out, something that is likely to drag on until at least October.
Aquis is prepared for the worst case scenario of having to switch trading to its new Paris unit, its head of regulation David Attew said.
The European Commission, which wants to deepen the bloc’s own capital market, said the EU would grant access when it was in its own interests to do so.
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