EU considering stopgap measure for UK financial services post Brexit, says EU diplomat

This post was originally published on this site

BRUSSELS (Reuters) – European Union assessments of whether to grant market access for banks and other financial firms from Britain will not be completed in time for January and stop-gap measures are being considered, an EU diplomat said on Thursday.

Britain’s unfettered access to the EU under transition arrangements ends on Dec. 31, leaving the City of London faced with being cut off from its biggest export customer, worth around 26 billion pounds a year.

The EU assessments are being made by the European Commission, which declined to comment, under the bloc’s system of direct financial market access known as equivalence.

“The European Commission told member states on Thursday that the equivalence decisions won’t be ready from January 1,” said the EU diplomat, who took part in the closed-door briefing.

“They are now looking at how to handle the gap,” said the person, who spoke on condition of anonymity given the sensitivity of the discussions.

Financial services are not part of ongoing talks between Britain and the EU on a free trade agreement, but are being handled separately under the equivalence system.

The EU grants access to foreign financial firms if it deems their home rules to be “equivalent” or as robust as the bloc’s own regulations and, in the case of Britain, likely to remain that way.

The EU executive has said that it will only grant equivalence when it was in the EU’s own interests to do so.

It has also said that it wants more information from Britain about its intentions to diverge from EU rules after next month, but Britain has said it has fully completed questionnaires from the bloc.

Brussels has granted temporary equivalence derivatives for clearing houses in London, but in the absence of equivalence, EU banks will have to stop using platforms in Britain for trading swaps and euro-denominated stocks from January.

Britain and the EU had said they would complete the equivalence assessments by the end of June, a deadline that was missed.

The protracted process prompted Britain this month to unilaterally grant continued UK market access from January for EU financial firms in some activities.