The EU is fine-tuning what access it’s prepared to give the UK’s crucial financial services industry after Brexit, and the proposal falls far short of what Britain and its banks think is fair.
The EU will consider offering the UK “improved equivalence” for its financial services, according to the latest draft of the bloc’s negotiating position, obtained by Bloomberg. That means the EU will only let UK banks access its market for as long as it considers British rules to be equivalent to the bloc’s.
It’s an unstable arrangement as the EU can withdraw the approval at short notice, and British Chancellor of the Exchequer Philip Hammond speaks for banks when he says it would be “wholly inadequate”.
The use of the word “improved” in the draft is intentionally vague, according to an EU official who declined to be named. The EU is already working to tighten up its equivalence regime--which is used now by US banks. Some EU members are keener than others on giving the UK a good deal on finance, and the wording of the draft text reflects that tension.
Britain and its banks have long given up hope of keeping full access to the single market via so-called passporting rights. But they are now pushing for a system of mutual recognition as they want a set of rules that is more durable and not subject to unilateral withdrawal. Mr Hammond has said that a post-Brexit trade agreement that doesn’t include services wouldn’t be “fair and balanced”.
Throughout talks, the EU has rejected attempts by the UK to cherry pick the best bits of EU membership. But the UK’s finance lobby saw the glass as half-full.