The EU’s financial services chief has warned that Brussels will be strict in policing the Britain’s rights of access to the bloc’s market after Brexit.
Valdis Dombrovskis said he welcomed UK proposals to build market access for the City of London around EU rules, known as “equivalence”.
Nevertheless, Dombrovskis has said market access could never be taken for granted, with Brussels determined to toughen its assessments of whether countries meet the conditions.
He went on to say that Brussels would not agree to any form of “super equivalence” to the UK, and that assessments of whether Britain qualified would require individual assessments “sector by sector and legislation by legislation”.
It’s expected that Brussels will press ahead with measures to reinforce oversight of equivalence access, with stronger requirements for countries’ financial supervisors to share information with the EU and more monitoring of whether jurisdictions continued to meet the criteria.
Mr Dombrovskis’ remarks are a sign of Brussels’ determination to prevent regulatory undercutting that could hand City firms an advantage over EU competitors.
But this is set to be a problem for the EU because of the importance of the UK financial system. UK-located banks underwrite around half of the debt and equity issued by EU companies, 1.4 trillion of European assets are managed in the UK and more than twice as many euros are trading in the UK than in the entire eurozone.
London has consistently retained its top spot as the world’s leading financial centre, fending off stiff competition from New York and Asian cities and well outstripping its EU counterparts. The reality is, that the UK is the leader in financial services, no matter what the EU would like.
London will always remain Europe’s primary hub for financial services because the city has the continent’s deepest markets broadest pools of talent, strongest tax and legal system and a global language.
The UK wants its future deal with the EU on financial services to look similar to the new EU-Japan pact. That would mean access to each other’s markets together with a bilateral agreement covering regulatory co-operation, data sharing and dispute resolution.
But thus far, the EU has only presented the UK with arrogance and belligerence that stand to benefit neither party. It should be time for the EU to realise that it needs to the UK financial services sector, as much as the UK needs the EU. Should the EU and the UK fail to conclude a deal that includes this, it seems it may only be the EU to blame.