Britain and Brussels have accused each other of delaying a decision on the City of London’s ability to do business on the EU markets next year, thereby prolonging the uncertainty of financial services regarding to come up.
The two sides agreed to complete the assessments of the regulatory regimes for other financial services by Tuesday, June 30, in the hope that they would be deemed “equivalent”, which would allow businesses to continue in the new year. .
As the deadline for an equivalence decision may be missed, the financial sectors on both sides have been left in the dark about future trading conditions, and the European Commission and the British government have blamed each other for the delay.
The UK is currently still in the single market and customs union, but this transition period, after the country’s exit from the EU, ends on December 31.
Michel Barnier, the EU’s chief negotiator, told the Eurofi financial regulatory think tank that the UK had only answered four of the 28 questionnaires that Brussels had sent out for information on financial services regulation.
“So we are not there yet,” he said. “We will only grant equivalences in areas where this is clearly in the interest of the EU; our financial stability; our investors and our consumers.
He reiterated a warning that equivalence could not be legally granted to insurance providers, commercial bank loans or deposits.
In response, a spokesperson for the Treasury compared the commission’s slow work to Whitehall’s effectiveness in examining the level of equivalence of the two regulatory systems.
The spokesman said, “The two sides have committed to complete the equivalency assessments before the summer. Since the UK and the EU share a similar regulatory position for financial services, this should be a simple process.
“The UK has been able to complete its own assessments on time and we are now ready to reach full equivalence conclusions as soon as the EU is able to clarify its own position.”
The British government is concerned that the EU will postpone a decision until the current negotiations on a trade and security agreement are clear.
It is understood that the government received more than 1,000 pages of questions in April and May, the last 248 pages arriving on May 25.
British officials are frustrated that the questions being asked are much broader than necessary for an equivalence decision to be made.
If Brussels decides that the UK regulatory regime is equivalent to its own, market access for British companies should follow. But Barnier, when he appeared by video message at the thinktank event, seemed to confirm Britain’s fears about the motivation of the EU by suggesting that Brussels wanted to be able to take into account all of the situation.
“These assessments are particularly difficult,” said Barnier. “Firstly, because they have to be forward looking, taking into account the declared public intention of the United Kingdom to deviate from EU rules after 1 January 2021. Last week, the United Kingdom Uni has published a document on its future regulatory framework for financial services. This is a useful document. We are now analyzing it in detail to clarify how the UK rules will evolve.
He added: “But let there be no illusions: the UK will gradually start to move away from the EU framework. This is even one of the main objectives of Brexit. “
The dispute erupted as UK chief negotiator David Frost and Barnier resumed talks on a comprehensive free trade agreement, their first face-to-face meeting in Brussels since February.
The equivalence decision is outside the negotiation, but the two teams are seeking to agree on a form of cooperation on the regulation of the financial services sector.
Barnier said he could not accept the UK’s proposals, which he described as seeking “the benefits of the single market without the obligations”. He accused the UK of trying to limit the EU’s ability to unilaterally withdraw “equivalence” in the future.
Barnier also said that the British government was trying to “facilitate the management of European businesses from London, with minimal operations and personnel on the continent.”