Some 7,000 European-based investment funds that rely on British clients for their cash and profits will be hit by regulators if European Union changes its position on the City of London after Brexit. This is the warning from London.
And it’s a tit-for-tat measure over financial services after Brexit. For instance, a section of a UK presentation made to the European commission’s negotiators last week, and seen by the Guardian, says that unless Brussels allows all UK sectors of the City of London to continue to operate after Brexit as they do today, at least initially, obstacles to European financial interests operating in the UK could also be put in place.
The British government says the EU’s “equivalence regime”, under which UK providers would have the right to offer financial services in the European economic area after Brexit, does not cover enough sectors or provide adequate assurances to UK-based banks and fund managers.
The UK negotiators’ presentation given last week warned that without fresh thinking both sides would raise damaging barriers to trade. “There is no third country equivalence regime to support the rights of around 7,000 EEA [European Economic Area] domiciled funds to market to UK retail customers, who operate under the passport today”, the paper said.
According to The Guardian, the UK wants equivalence decisions to be made collaboratively between Brussels and Whitehall on whether parts of the financial sector will be able to continue to operate across the Channel as regulations diverge after Brexit.
As it stands, a declaration of equivalence can be easily revoked with only 30 days’ notice under existing EU legislation.
The EU is resisting, and insists it will not offer a bespoke deal on financial services. It says that what works for US financial services providers will have to work for the UK.
It remains to be seen if both sides will reach a compromise. According to The Guardian, one senior EU official said Brussels had been “very kind to the white paper, given that it is a completely unworkable document”.