Now that the Brexit negotiations have turned to the possible shape of a financial services deal, we should understand what a good result would look like and why. A mutually advantageous deal would allow both the UK and EU financial sectors to trade freely and flourish. It would permit EU customers the cheapest access to capital.
Most people in the sector want a mutual access arrangement for financial services which replicates what happens now – whereby UK-based firms operate across the EU supervised solely in the UK under pan-EU regulations, and EU-27 firms operate in the UK whilst being solely supervised in their home state. After Brexit, firms located in the UK want to be solely supervised here under UK regulation, but to service clients across the EU without being supervised or regulated in the EU. EU firms want to be supervised solely in the EU under EU regulation whilst conducting business in the UK’s global markets.
In order to achieve these aims, some form of agreement must be reached on how similar the relevant financial services laws and regulations in the UK and EU need to be. Otherwise neither party will be satisfied that providers from the other party are operating safely in their markets. This is the main concern to navigate, since the EU Treaty provides for free movement of capital to and from so-called third countries, which is what the UK will be after Brexit. It does not seek to disadvantage EU customers by cutting off their access to competitively priced products, and indeed EU businesses themselves wish to compete in the global markets.
To read Barney Reynolds’s piece for ConservativeHome in full, click here.