EU and U.K. nearing first, small step for post-Brexit finance

Britain and the European Union are nearing agreement on how to cooperate on financial market rules—a first, limited step toward working together after Brexit.

The two sides are proposing a joint forum for discussing regulations and sharing information, though this accord won’t require them to open markets through so-called equivalence decisions, according to a draft memorandum of understanding seen by Bloomberg News.

The forum would lead to “informal consultations concerning decisions to adopt, suspend or withdraw equivalence,” according to the draft. Each side will keep the power to make and change its own rules.

Since Brexit took effect at the beginning of 2021, London-based financial firms have been largely unable to operate in the bloc, forcing them to move billions of dollars in assets and thousands of staff to the continent. Officials said after striking a trade deal in December, which sidelined the finance industry, that they would work on a memo governing regulatory cooperation by March.

The European Commission told EU ministers at a meeting earlier this week that the proposal is based on the framework the EU currently has with the U.S., according to a diplomatic note seen by Bloomberg. The Commission declined to comment, while the U.K. Treasury did not immediately respond to a request for comment.

The technical memo has little bearing on the EU’s reluctance to grant access to British firms through equivalence, where regulators declare that the other country’s rules are robust enough in a series of unilateral, revocable rulings. French minister Clement Beaune said this week that partial equivalence could be possible by mid-2021.

And it’s still unclear whether post-Brexit policy makers will push for cooperation over independence. Some in the EU have proposed bringing more finance business into the bloc, including euro-based clearing that currently takes place in London—an approach that Bank of England Governor Andrew Bailey has said “we would have to, and want to, resist very firmly.”