U.K., EU Brexit forum seeks dialog on finance market access

The newly-agreed forum between Britain and the European Union will seek “transparency and appropriate dialog” about cross-border financial market access, according to the accord reached last week for post-Brexit regulatory cooperation.

That marks a slight change from earlier drafts that said the two sides would have “informal consultations” on equivalence. The agreed version also no longer explicitly commits the two sides to discuss taxes on the financial industry, as an earlier EU draft did, according to a person with knowledge of the document.

The memorandum of understanding said the two sides will have a dialog on “the process of adoption, suspension and withdrawal of equivalence decisions” that are needed by each side to repair the ongoing rupture to banking and trading. The agreement emphasizes that equivalence remains a separate and unilateral process.

Though both sides have downplayed the potential for any rapid breakthroughs in relations, the agreement’s wording suggest it may help ease separate assessments by the two sides on whether to let the City of London have more access to the bloc. The forum may start its activities as soon as the agreement is signed.

“Let’s keep things in perspective – this is essentially just a commitment to cooperation and little more than that at this stage,” said Kay Swinburne, vice-chair of financial services at KPMG UK. “It doesn’t deal with anything of substance, such as market access issues, and we aren’t anywhere near agreeing equivalence.”

Technical Discussions

The U.K. Treasury said last week that technical discussions on the text had been concluded and formal steps need to be taken by both sides before the memorandum is signed. “It is expected that this can be done expeditiously,” the statement said.

Since Brexit took effect at the beginning of 2021, London-based financial firms have been largely unable to operate in the bloc, forcing banks like JPMorgan Chase & Co. and Goldman Sachs Group Inc. to move billions of dollars in assets and thousands of staff to the continent. The trade agreement signed by the two sides last year largely sidelined the finance industry, and the EU has said since that it’s in no rush to grant the equivalence rulings that would restore British firms’ trading rights.

The forum’s mandate includes:

• exchanges of views on the respective policies, rules and processes concerning deference regimes, such as equivalence, or other tools used to address cross-border issue
• the sharing of information on regulatory developments
• keeping each other informed about efforts to prevent and combat money laundering and terrorist financing as they relate to the financial services sector