EU warns Britain: Don’t expect equivalence for financial services anytime soon

The European Union will strive for close co-operation with Britain on financial services but London cannot expect “equivalence-based” access to the EU financial market if it diverges widely on rules, the bloc’s finance chief, EU Financial Services Commissioner Mairead McGuinness told an online event.

Britain’s new trade deal with the bloc, which took effect on January 1, does not cover financial services. The City of London is likely to get only limited “equivalence-based” access to the EU financial market for the foreseeable future.

Bank of England Governor Andrew Bailey urged the bloc on Wednesday not to pick a post-Brexit fight with Britain over its huge financial services industry, and said the EU was demanding more of London than of other trade partners.

“The EU has argued it must better understand how the UK intends to amend or alter the rules going forwards,” Bailey said. “This is a standard that the EU holds no other country to and would, I suspect, not agree to be held to itself. It is hard to see beyond one of two ways of interpreting this statement, neither of which stands up to much scrutiny,” Bailey said in a speech at Mansion House on Wednesday.

“While the issue of equivalence is an area which we will discuss with the United Kingdom progressively, taking into account the UK’s regulatory intentions on a case by case basis, there cannot be equivalence and wide divergence,” McGuinness insisted.

Both sides have committed to agreeing a memorandum that will govern their future financial sector relations by the end of March and McGuinness said on Thursday that the draft is very similar to what the EU has in place with the United States.

However she said it would not simply be the case that a basket of equivalents would be grated immediately once those structures are in place, but rather that they would likely be considered on a case by case basis.

“It goes back to the logic of Brexit, which as I understood it was to diverge and to be independent and sovereign. When it comes to financial co-operation, we need to understand what that means in terms of UK regulations,” she said, adding that both sides nevertheless had “a duty to make this work.”