The U.K. government will break away from European Union rules governing financial services, but wants to agree a “durable” trading relationship for banks, Chancellor of the Exchequer Sajid Javid said.
The Treasury is drawing up a detailed plan for trade negotiations with the EU and, writing in the London newspaper City A.M., Javid insisted Britain will diverge from the bloc’s regulations.
“We may choose to do things in the same way as the EU if it works for the U.K.,” Javid writes. “But there will be differences, not least because as a global financial center the U.K. needs to keep pace with and drive international standards. Our starting point will be what’s right for the U.K.”
The future access to the EU market for London-based banks will be a crucial battleground in the U.K.’s negotiations with the EU. Outside the bloc’s single market, financial services firms in the U.K. will no longer have automatic “passporting” rights allowing them to operate freely across the 27 EU member states.
Instead, they are likely to rely on a less stable arrangement known as “equivalence,” under which regulations on both sides are judged to be adequately aligned. One concern for the finance industry is that the EU can withdraw “equivalence” with just one month’s notice. The Financial Times reported in Tuesday’s edition that Javid wanted a form of permanent equivalence.
In his City A.M. article, he wrote that he wanted a “reliable equivalence process” on which “a durable relationship” can be built.
The U.K. left the EU on Jan. 31 and is now in a transitional period lasting until the end of the year, under which existing EU rules will continue to operate. Prime Minister Boris Johnson has insisted he wants to finalize a new trade deal before the transition phase runs out on Dec. 31.
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