Thursday

23rd May 2019

London firms seek free trade after Brexit

  • Financial firms want certainty on "passporting" rights after Brexit. (Photo: Universiteitskrant Univers)

London's leading businesses are proposing a free trade deal on financial services after Brexit, including a dispute settlement body to secure the City's leading role in finance.

A report launched on Tuesday (26 September) by the the International Regulatory Strategy Group, made up of City experts and sponsored by the City of London and TheCityUK, outlines mutual market access in financial services after Brexit.

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This would make it possible, the report argues, to allow UK financial services firms to operate inside the EU, and for European financial services firms to operate inside the UK without restrictions.

The so-called "passporting" rights, which currently allow UK financial firms to trade freely in the single market, will be lost when Britain leaves the EU. City firms want to avoid tariffs, taxes or quotas after Brexit.

Some banks are considering moving their bases to the continent, risking London losing its leading global role in financial services.

Talking to journalists on Monday, Mark Hoban, the chair of the ISRG council and former City minister, warned that it should not be assumed that European financial centres will automatically benefit from firms leaving London, as Singapore and New York might be just as attractive.

"This is a Europe-wide issue, it is about Europe's role in the world," he argued, adding that banks have yet to implement their plans for after Brexit.

Around 13,500 banks, insurers, asset managers and other financial firms use EU passporting rules that allow easy access between Britain and the EU-27.

More firms in Europe are using passporting than UK-based firms, according to Reuters figures.

The ISRG report argues that the free trade deal on financial services should be based on regulatory alignment between the UK and the EU.

The report proposes a forum of regulators that would oversee supervision and enforcement, would monitor divergence between EU and UK regulations, and implement new global standards.

It also outlines a dispute resolution body between the UK and the EU, made up of an independent, judicial body where representatives of both parties would be present, overseeing the implementation of the agreement.

After public opposition increased to free trade deals, the EU has recently been trying to move from a bilateral dispute settlement mechanisms towards the establishment of a permanent multinational court system.

Mark Hoban argued, however, that for the UK-EU agreement a "bilateral basis would be the best".

Hoban added that the report's proposal is not equal to membership in the single market, something the EU-27 want to avoid as the UK leaves the bloc and the internal market.

"It gives a high degree of access, but does not guarantee access," he said.

Meanwhile, Reuters reported that Britain's financial watchdog has not had any applications - as yet - for licences from EU financial firms operating in the UK, some of which may lose the right to "passport" their services into the country after Brexit.

"We haven't had any yet. I would say this is still talks about talks in some ways," Financial Conduct Authority chief executive Andrew Bailey was quoted by Reuters as saying.

Around 8,000 firms are using "inbound" passports issued by the EU-27 to allow them to do business in Britain or elsewhere, and about 5,500 firms are using "outbound" passporting - issued by UK regulators.

Bailey said the number of passports rose over the last year.

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