City of London Doesn't Want the Kind of Trade Deal May Cites

(Bloomberg) -- Theresa May is right to say that the European Union has included financial services in its previous trade deals. Whether she'd appreciate getting the same terms after Brexit is another matter.

The prime minister reiterated on Monday that the U.K. is looking to “include financial services in our economic partnership” with the EU, adding that “the EU has included financial services, to varying degrees, in quite a number of the trade agreements that they have already established with other countries.”

Yet if the goal is to retain the kind of access currently enjoyed by U.K. firms, there's little that could serve as a blueprint. Take the EU's arrangement with Canada, where a whole chapter is indeed devoted to financial services. Since it doesn't allow Canadian banks to do business in the EU without seeking a local license first, it doesn't come close to the kind of relationship sought by the British financial industry.

That point has also been made by Michel Barnier, the EU's chief Brexit negotiator, and is backed up by a 2014 report by the European Parliament, which concluded that the bloc's trade agreements with Chile, South Korea and other nations do little to facilitate the “cross-border supply of services.”

To bridge the gap, the City has proposed a “bold and ambitious” deal that could allow firms to operate in both jurisdictions without seeking a local license. The elements needed to put such a framework in place -- ongoing regulatory alignment, mutual supervision, a dispute resolution mechanism, and more -- may prove difficult for negotiators in London and Brussels.

--With assistance from Thomas Penny

To contact the reporter on this story: Alexander Weber in Brussels at aweber45@bloomberg.net.

To contact the editors responsible for this story: Neil Callanan at ncallanan@bloomberg.net, Stuart Biggs, Emma Ross-Thomas

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