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The UK is expected to sign a memorandum of understanding with the EU on financial services cooperation.
A forum will be established where the EU and UK can meet twice a year to discuss financial regulation and standards.
The long-awaited move is seen as a sign that the UK is ready to work more closely with the EU.
The Chancellor said building a constructive relationship would be mutually beneficial as the UK and EU financial markets are “deeply connected”.
The memorandum was first set out in the UK-EU Trade and Cooperation Agreement after the UK lost full access to EU markets as a result of Brexit.
The text was published last month and the memorandum itself sets out a list of broad common goals.
However, calling this an “agreement” is misleading. This does not mean that the UK is committed to aligning itself with the EU when it comes to regulation, nor that it will comply with previous calls that Brussels may have signaled, such as moving settlement of some euro-denominated financial instruments out of London.
This means that both sides commit to a regular bi-annual meeting to discuss “voluntary regulatory cooperation on financial services issues”.
“Both sides will share information, work together to address common challenges, and coordinate positions,” the memorandum said.
Daniel Ferrie, a spokesman for the European Commission, said the move will “create a forum to facilitate dialogue”.
However, he added: “It does not restore the UK’s access to the EU, nor does it prejudge the adoption of equivalence decisions.” Under equivalence, foreign companies can be granted access to the EU in certain areas of financial services if the rules applicable to the sector are considered “equivalent”.
Crucially, however, following agreement on the Windsor framework, this is yet another sign that the UK has become more conciliatory and pragmatic in its approach to the EU than it was under previous Prime Ministers Boris Johnson and Liz Truss, and possibly a stronger one Approach could signal future regulation. However, a discussion of this is avoided in the text.
The story goes on
The EU accounted for 37% of UK financial services exports in 2019 and the UK has maintained its position as Europe’s main post-Brexit financial center while far fewer jobs have been relocated, less than 10,000.
Chris Hayward, Policy Chair of the City of London Corporation, said the signing of the memorandum “sets the stage for a new era of cooperation with our EU partners”.
“We hope this agreement will help ensure that our two financial services sectors remain open for business.”
Treasury Department sources have acknowledged that the Windsor Framework agreement has paved the way for getting this memorandum across the finish line. This bodes well for closer work on some of the remaining parts of the post-Brexit arrangements – not least the tougher rules of origin rules to apply to automakers.
In practice, however, this should not mean any significant changes for financial services in the near future. Probably only three forums remain until the next election.
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