EU future relationship with City of London ‘hinges on trust’

The European Union is not intent on stealing business from the City of London, but future access for Britain to the bloc’s financial market will hinge on whether it can be trusted to keep its word, EU financial services chief Mairead McGuinness said on Tuesday.

Trading arrangements for Northern Ireland since Britain left the EU have created tensions, with Britain unilaterally delaying the implementation of some provisions in a protocol.

McGuinness, Ireland’s commissioner in Brussels, said the EU was waiting to see which path Britain chose: sticking to obligations agreed when it left the EU, or continuing to act on a unilateral basis.

“We hope that the UK will choose the first, more appropriate and sustainable path. That will help us cooperate across sectors, including in financial services,” McGuinness told the City Week event held by City & Financial.

“When you sign up to international agreements and make commitments, partners need to be able to count on your word and your signature.”

Britain’s full departure from the EU’s orbit last December largely severed the City from the bloc, leading to a shift in billions of euros in daily stock and swaps trading from London to the EU.

The bloc is now seeking ways to shift clearing of euro derivatives from London to Frankfurt.

Amsterdam is also proving an early winner. Data in February showed the Dutch city had displaced London as Europe’s biggest share trading centre in January, and had overtaken London to become Europe’s top corporate listing venue so far this year.

McGuinness said the EU’s goal was not to “steal” business from London but to build up its own financial market infrastructure.

Britain and the EU have agreed a memorandum of understanding for a new forum for cooperation in financial regulation but it has yet to go live. It is an important step for any prospect of City access to the EU under the bloc’s ‘equivalence’ rules.

“Once the MoU is formally concluded, we will have to consider whether we can resume our financial services equivalence assessments,” McGuinness said.

“When we do resume our assessments, we would do so gradually, and on a case-by-case basis, taking into account the UK’s regulatory intentions and the EU’s interest.”