Nikhil Rathi, head of the Financial Conduct Authority (FCA), said in a first major intervention that European Union lenders had lost market share due to resistance to a so-called equivalency agreement that would have preserved ties with Great Britain.
He added that the UK would not pursue access to the EU at any cost – and pledged to use the country’s post-Brexit freedoms to reformulate onerous regulations.
Mr Rathi said: “EU banks are no longer able to offer their clients full access to all global liquidity pools for trading in interest rate swaps and certain credit derivatives. , as the UK platforms have retained a significant market share in various products.
“This loss of access to liquidity reduces competitive choice in the market for customers in the UK and the rest of the world and, unsurprisingly, some EU banks have been reported to have lost market share in these market segments.
“This means higher costs for EU businesses, with a direct impact on the prices they can offer their customers. And inevitably, customers in the UK and the rest of the world have no choice but to anticipate new contingencies in which EU businesses are unable to meet a wider range of their needs. “
The interest swap market is crucial for a multitude of products offered to ordinary consumers, such as fixed rate mortgages. If banks are less able to access key shopping centers such as the City – which dominates the European derivatives market – costs to their customers will eventually rise.
Mr Rathis’ comments follow a difficult period leading up to the UK’s exit from the EU, with the financial sector largely excluded from the Brexit trade deal and the city’s now dispossessed businesses. their essential passport rights in the EU.
Businesses relied on access through an equivalency regime, where UK rules are seen as so similar to the EU’s that cross-border trade is a long way off on both sides.
The UK has granted equivalency access to European companies in many areas. Even though UK and EU regulations were exactly the same at the time of Brexit and remain virtually identical, the EU has refused to reciprocate. This has forced its banks to look to less developed mainland markets for certain services.
Banking industry insiders have said in recent weeks that they have largely given up on any hope of achieving equivalency.