Wall Street and U.K. banks hoping to keep broad access to European Union markets after Brexit may need to think again.
The British government said Thursday it won't seek to ease market access for London's financial firms, though it will try to prevent a sudden cut-off. Some of the industry's demands -- such as securing gateways for parts of finance that aren't covered by the current system -- are not reflected in the negotiating documents.
The EU has long said that it will police access to markets after Brexit with its so-called equivalence system, with both sides aiming to have agreements in place by June. Under this framework, foreign financial firms can be given access to the EU only if officials in Brussels think the rules are tough enough in the companies' home state.
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The system's shortcomings, in the eyes of many U.K. firms, is that it only covers limited parts of the industry and access can be withdrawn at short notice. The EU's equivalence process doesn't cover some core banking activities, such as investment services for retail clients, deposit-taking and cross-border loans.
The U.K. called for a more structured process for withdrawing equivalence or letting it lapse, arguing this would “facilitate the enduring confidence which underpins trade in financial services.”
That kind of assurance from the EU may not be won easily. In its own negotiating mandate presented this week, the bloc said that while “appropriate consultation” between the two sides is important, the EU's regulatory and supervisory autonomy should be preserved -- a signal that it's not willing to give away any powers it currently holds.
--With assistance from Silla Brush.
To contact the reporter on this story: Alexander Weber in Brussels at aweber45@bloomberg.net
To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Marion Dakers, Ross Larsen
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