Business

Japan offers clue for British banks’ future in Europe after Brexit, U.K. says

by Ian Wishart

Bloomberg

The U.K. now sees its banks having a similar relationship with the European Union after leaving the bloc as Japanese ones do.

The latest U.K. paper published Monday confirms the government wants a form of “equivalence” on financial services — where the EU recognizes that rules are as strict as its own — but a more generous version of it than other non-EU countries enjoy. It cites the EU’s pact with Japan as a precedent for a deal because it includes a commitment to take into account the impact of each other’s decisions, as well as regulatory dialogue between the two sides.

The document, essentially the details of the skeleton proposal in Prime Minister Theresa May’s “white paper” last month, confirms the government has scaled back its initial ambition for British financial institutions to keep the same sort of so-called passporting access to the EU’s single market as they do now.

Governments in the EU have differing views on how they should do business with British financial firms after Brexit. A Luxembourg-led group wants to give U.K. banks easier access to European markets, but other countries — including France — take a harder line and want the U.K. to be treated no differently from other nations outside the bloc, such as the U.S.

The U.K. is chiefly concerned about the EU’s ability to withdraw equivalence rights at short notice and with no consultation. The government argues in the document that while it doesn’t want to undermine the EU’s “autonomy” on decision-making, that shouldn’t prevent either side from making “commitments today about how we will approach our respective judgments” on equivalence.

The government also calls for both sides to agree “sensible timetables for winding down activity and avoiding retaliation.”

A deal on financial services is part of the second stage of Brexit negotiations that will be struck only if there’s an agreement on issues connected to the U.K.’s withdrawal. A key sticking point in those negotiations is how to prevent the reemergence of a hard border between Northern Ireland and Ireland, which will become Britain’s frontier with the EU.