The European Union won’t rush to enhance market access for financial firms outside the bloc, a senior German official said, pushing back against key U.K. government demands in the Brexit negotiations.
Expanding EU “equivalence” rules, which can open the single market to non-EU firms, to new areas such as banking is unlikely anytime soon, said Levin Holle, director general for financial-markets policy at the German Finance Ministry. And any arrangement granting mutual market access for EU and U.K. firms “would have to maintain full regulatory autonomy,” including the right to unilaterally withdraw access at any time, he said.
Holle’s position, set out in an article in the Eurofi Magazine, is consistent with the line taken by Michel Barnier, the EU’s chief Brexit negotiator. Barnier has said U.K. banks should face similar restrictions to U.S. institutions, which operate under equivalence arrangements. It runs counter to that of Theresa May’s government, however, and demonstrates how far apart the two sides remain.
The U.K. wants a more generous version of equivalence, whereby the EU deems a country’s rules and supervision to be as robust as its own, than other non-EU countries enjoy. It’s concerned about the EU’s ability to withdraw equivalence rights at short notice and with no consultation.
While the EU is adapting its equivalence rules to new developments such as Brexit, expanding its scope beyond the areas already covered probably won’t happen quickly, Holle said. What could be achieved by end-2020, when a planned Brexit transition period ends, would be equivalence decisions under existing rules as they stand at that time, covering areas such as derivatives clearing, he said.
Holle also took issue with U.K. concerns about the role the European Court of Justice might play in resolving future disputes.
“A dispute-settlement mechanism governed by an independent judicial body (and not the ECJ) deciding on disputes about regulatory principles would restrain both the regulatory sovereignty and the competence of the ECJ, and would therefore most likely not be acceptable for the EU,” he said.