The UK and EU negotiators have secured an agreement on the future relationship of financial services that operates in the…
The UK and EU negotiators have secured an agreement on the future relationship of financial services that operates in the two jurisdictions after Brexit, The Times reported on Thursday.
Referring to British government sources, the Times reports that both sides have signed a “preliminary” agreement that allows Britain to continue to access European markets once Britain has left the EU.
Securing an agreement on financial services has become one of the most difficult parts of Brexit talks due to the industry’s high international, highly regulated character. Britain is currently building on a system of so-called “passport”, but is likely to need a new framework for its relationship to Brexit.
Passport Rules Allow EU Finance Companies to sell their services over the 28 member block with a local license rather than getting permission to operate in each member country in which it deals with business. Its use is linked to membership of the European single market. Britain is likely to leave the single market as part of Brexit and will no longer be able to do business by using these rules once it has left the EU.
Read more: Europe closes a trade violation that banks relied on to handle Brexit
Times report that the new relationship will be based on the principle of equivalence.
According to the Equal Opportunities Framework, the EU recognizes that the legislation, regulation and enforcement regime in a non-EU country is as good as it is and allows the state to access the financial services sector within the block. Countries like Singapore and the United States use a similar system for trade in financial services with the EU.
The British Government has consistently argued that it will strive to improve existing requirements for equivalence between the rules between the EU and third countries.
The EU was initially skeptical of these plans ̵
1; claiming that it did not allow the block to be completely independent – but has softened in recent months and now it seems to have been acknowledged that this system is the best way forward.
According to the proposed system, The Times states that the equivalence rules will be tweaked, which means that the current system, where “market access can be pulled unilaterally with just one month’s notice” will be removed, with the length of time extended and the implementation of Equity principles under control of the main trade agreement between the EU and the UK.
Later EU officials poured water on reports of breakthrough, with chief executive Michel Barnier, describing media reports on the subject of “misleading”.
“Misleading press articles today at #Brexit & Financial Services. Reminder: The EU can grant and revoke equivalence in some financial services autonomously. Like in other third countries, the EU is ready to have a close regulatory dialogue with Britain in full respect for autonomy, both sides, “tweeted him.
The pound has responded well to the reports of an agreement for the city, with the UK’s currency jumping more than 1.1% on the morning trade on Thursday. After 8.45.00 GMT, the pound is 1.2908 against the dollar, as shown in the chart below: