The UK and European Union have agreed the terms for future financial services interaction between the two jurisdictions.
Officials from the European Commission, the EU’s executive body, and UK’s Treasury department have been locked in discussions about the future of financial services since January, in a bid to sign a so-called Memorandum of Understanding on post-Brexit regulatory cooperation by the end of this month.
A statement from the UK’s Treasury department said: “Formal steps need to be undertaken on both sides before the MoU can be signed but it is expected that this can be done expeditiously.”
A statement from the European Commission added: “The MoU, once signed, creates the administrative framework for voluntary regulatory cooperation in financial services between the UK and the EU. The MoU will establish the Joint UK-EU Financial Regulatory Forum, which will serve as a platform to facilitate dialogue on financial services issues.”
The text of the post-Brexit framework for financial services has been agreed but not yet released, according to a person familiar with the matter. The agreement in principal is subject to approval from the 27 member states of the EU.
The final agreement is expected to mirror an existing framework between the EU and the US by including a commitment for regulators on both sides to meet regularly to discuss future rule-making and share information.
A draft of an agreement, leaked in February and seen by Financial News, included a commitment to conduct “informal consultations concerning decisions to adopt, suspend, or withdraw equivalence” — the EU regulators’ process for granting market access to UK firms if the country’s financial rules are deemed similar to its own.
It also committed to respect “regulatory supervisory autonomy” on both sides.
News of an agreement in principle on financial services marks a rare high in the UK-EU relationship relationship which has been strained since a Brexit trade deal was agreed in December, by ongoing rows over issues including trade at the Northern Ireland border and exports of coronavirus vaccines.
The December trade deal largely ignored the UK’s finance sector and prompted the government to initially vow to secure an agreement that would lower Brexit-driven hurdles to trading, investment banking and asset management. UK policymakers indicated they would push for a Brexit deal for finance that hinged on equivalence.
But frustrations have since mounted over the EU’s reluctance to grant equivalent financial services access to the trading bloc.
The Prime Minister’s office in February complained about the bloc’s unwillingness to grant the UK equivalence. The Bank of England governor Andrew Bailey has also called on the EU to rethink its approach to determining the UK’s post-Brexit access to the trading bloc.
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