London could lose to New York in proposed EU funding deal: document

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In this news, we discuss the London could lose to New York in proposed EU funding deal: document

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LONDON (Reuters) – The City of London’s financial sector is said to be worse off than rival New York according to a first draft of a financial services cooperation agreement between Britain and the European Union, a report said. document viewed by Reuters.

The UK financial services industry has been largely cut off from the EU, its biggest customer, since the end of the Brexit transition period on December 31, with the sector not covered by the UK trade deal -EU.

EU equity and derivatives trading, for example, has already left Britain for mainland Europe.

The two sides pledged to reach a memorandum of understanding by the end of March on regular and informal discussions on financial rules and market surveillance.

An early draft of the document, seen by Reuters, has less substance than a deal the EU struck with the United States in 2016, industry officials said.

“This is the start of a negotiation – the text proposed by the Commission is clearly more limited than the UK’s ambition,” said Chris Bates, financial services lawyer at Clifford Chance.

The US agreement, for example, says that equivalence, a reference to the EU’s system of granting direct market access to foreign financial firms, should be “results-based.”

Britain has also called for the EU’s equivalence to be results-based, which would ensure that the focus is on whether financial rules in Britain and the EU produce the same result.

There is no mention of outcome-based equivalence in the draft EU-UK memorandum.

The EU text is deliberately less ambitious than the US deal and does not even reflect the current depth of relations with the bilateral memoranda of understanding already signed between individual regulators in Britain and the EU, said a source from the financial sector.

But industry officials have also said that even the draft document currently in circulation would be a start in restoring trust between the two sides.

“It is important to establish a framework for regulatory dialogue, although there are few expectations of any movement on new equivalency decisions anytime soon,” Bates said.

The financial sector wants Britain to include a provision for consultations with the industry as part of the regulatory dialogue, the first source said.

“The MoU is on the lighter side of what the city wants,” a second financial industry source said, adding that it might make little difference given that Britain will likely only get limited equivalence.

The European Commission declined to comment on the document. The UK Finance Department made no immediate comment.

Brussels has already made it clear that even an agreed MoU would not automatically lead to better access to the EU for London’s financial sector beyond a time-limited authorization to clear derivatives transactions from the EU. ‘EU.

The EU executive will meet with banks on Friday to ask how they can justify continuing to clear derivatives in London.

Bank of England Governor Andrew Bailey said this week Britain would resist any attempt by the EU to trick banks into transferring billions of euros in derivatives clearing from Britain. Brittany towards the boulder.

Reporting by Huw Jones. Edited by Jane Merriman

Original © Thomson Reuters

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