Britain’s hopes for a bespoke deal to let the City of London access the EU, and companies across the Channel to access finance in the UK, has taken a blow as a top European Commissioner warned that Brussels wants to keep an unusually tight hold over banking regulation.
Valdis Dombrovskis, the top official for financial services, told a City audience that he wants Britain to use the more generic ‘equivalence’ rules, which give Brussels more control – a system rejected by the UK Government.
Under equivalence rules, the EU could potentially give the UK just 30 days’ notice before pulling the plug on the agreement.
“Equivalence is not perfect, neither for firms nor for supervisors. But one should not make the perfect be the enemy of the good,” Mr Dombrovskis said at the City Week conference in London. “Equivalence has proven to be a pragmatic solution which works in many different circumstances, and it can be made to work for the UK as well.”
By contrast the UK wants a bespoke agreement of ‘mutual recognition’ in which the EU and Britain accept trade with each others’ firms as both sets of regulators are implementing the same global rules.
This should give finance firms on both sides of the Channel access to each others’ markets, even if the precise rules vary.