Chief Brexit Negotiators Discuss Post-Brexit Treatment of UK Financial Regulations
On January 9, Michel Barnier, the European Union’s (EU’s) chief Brexit negotiator, delivered a speech at the “Trends Manager of the Year 2017” event in Brussels, and on January 10, the UK’s Chancellor of the Exchequer, Philip Hammond, and the UK’s Secretary of State for Exiting the EU, David Davis, published a joint article that originally appeared in Frankfurter Allgemeine Zeitung, a German newspaper. Both the speech and the article commented on future economic ties between the EU and the UK, covering a broad range of services industries, focusing in particular on financial services.
Mr. Hammond and Mr. Davis wrote that the UK will be seeking to “ensure that financial authorities across the world can cooperate in rule-setting and supervising systemically important global firms.” Therefore they will be re-doubling their efforts to get “a deal that supports collaboration within the European banking sector, rather than forcing it to fragment.” They have proposed a time-limited implementation period after the UK leaves the EU so that access to the EU from the UK and vice versa can continue in its current form, using the EU’s existing regulations and agencies. The European Commission has proposed that the implementation period last for 21 months, from the date of the UK’s withdrawal on March 29, 2019 to December 31, 2020, to allow businesses and public administrations the time to prepare themselves for the finalized withdrawal agreement.
In his speech, M. Barnier said that by using “a proportionate and risk-based approach.” the EU would be able to consider some of the UK’s financial rules as equivalent to those of the EU. But he also reiterated that once the UK exited the EU on March 29, 2019, the EU would not give UK financial firms a general “passport” to do business in the single market. Therefore, a system of generalized equivalence of standards would not be enjoyed by the UK’s financial service providers. Mr. Barnier also warned that a “trading relationship with a country that does not belong to the European Union will never be frictionless.”
Mr. Barnier concluded that the EU27 will need to continue to work together in a united way to reform Europe and to overcome challenges, including building a real Capital Markets Union and a “global Europe” prepared to offer its businesses new opportunities to export to Australia and New Zealand.
A copy of Mr. Barnier’s speech is available here.
A copy of the article by Mr. Hammond and Mr. Davis is available here.