The UK continues to push forward its agenda of maintaining its financial hub of London, in the loop of European financial activity, despite the country’s decision to break apart from the union.
The UK as proposed an arrangement, which would see both sides recognize each other’s regulatory bodies and rules, as well as a cooperative effort to enforce a similar framework of rules when Brexit officially commences.
The plan calls for the UK to maintain its set of rules and regulations as aligned as possible with those of the EU, albeit with a dispute resolution mechanism that will be implemented in the event that one side fails to adhere to the agreement.
The British Angle
On the British side, it appears that the proposal is likely to gain support from cabinet and government officials. Early indications point to Bank of England Governor, Mark Carney, supporting the sentiment, in an effort to maintain London’s financial sector’s importance to the financial activity of the EU.
An important figure showing support for the proposal is Chancellor Phillip Hammond, who is loosely expected to offer public support for the mutual recognition agenda in a speech as early as next week.
UK leaders seem intent on pushing the proposal forward, likely due to the fact that it permits the country to promote its own set of rules, while at the same time maintain a level of stability in matters with mutual agreement.
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Despite the sentiment that UK officials and authorities are inclined to promote the proposal, a consensus has yet to be reached on the British side to this point.
Meanwhile, resistance is likely to ensue from EU members, due to concerns over placing the stability of the EU economic spectrum at risk.
Perhaps the leading antagonist of such an agreement would be EU Chief Brexit Negotiator Michel Barnier. Mr. Barnier has consistently maintained that the UK would not receive full access to the EU’s financial services, thereby getting special treatment that other non-EU countries do not receive.
Theresa May is expected to discuss Brexit with German Chancellor Angela Merkel today, and it is anticipated that the financial services stalemate will be at the forefront of their discussions.
The complex nature of the negotiation process creates a puzzling scenario, due to the EU’s clear awareness of the importance of the clause to the UK’s cause. Therefore, EU negotiators are unlikely to cede any progress regarding financial services access, without receiving a substantial benefit somewhere else in the negotiations.
Mr. Barnier has already noted that in all likelihood, the UK will need to acclimate to the same equivalence method applied with other non-EU countries. While there is precedent for regulatory cooperation, the chances that the UK receives full access to financial services remains bleak, barring an unexpected turn of events.
While many financial institutions and banks are unclear about the level of change that will be incurred as a result of Brexit, many others have actively pursued Post-Brexit plans, in an effort to avoid being unprepared when Brexit officially commences.