Equivalence hopes on financial rules fade as EU slams UK’s lack of commitment

EU’s McGuinness: “It is both parties’ responsibility to implement what was agreed”

by | June 22, 2021 | bobsguide

Prospects for a EU-UK equivalence agreement on financial services regulation appeared to ebb away after EU commissioner Mairead McGuinness criticised the UK’s lack of engagement since its official departure from the bloc in January 2021.

The EU commissioner for financial services warned that before the EU could “gradually” and on a “case-by-case basis” assess equivalence applications, the UK would first have to choose what sort of relationship it wanted to pursue going forward.

“The first path is deciding to work together, with the United Kingdom abiding by its obligations and engaging in good faith. And the second path, is if the United Kingdom continues to act on a unilateral basis.”

Before this choice was made clear, McGuinness said, the EU would not resume assessments on equivalence.

Speaking at City Week 2021 on Tuesday, McGuinness said that the UK government’s wider political actions around issues like the Northern Ireland protocol were making agreements in financial services more difficult due to a lack of trust.

“Without trust we are nowhere,” she said. “And the withdrawal agreement, including the Northern Ireland protocol, are prerequisites for that trust.”

“We negotiated the deals together. We agreed them together. We signed them together, and with the ink barely dry, it is both parties’ responsibility to implement what was agreed in good faith,” she added.

A Matter of Perspective

In stark contrast to McGuinness’s emphasis on trust as a key precondition to any agreement, UK economics and City minister, John Glen MP, said on Monday that the ball was in the EU’s court on the matter of financial regulation equivalence.

“It is a matter for them to determine what they deem us to be, although we’ve obviously been completely aligned until January,” he said at the City Week event.

Katharine Braddick, director general of financial services at HM Treasury, sought to downplay the significance of Brexit in affecting the UK’s relationship with the EU in financial services, telling the conference yesterday that there was “no major departure” from the regulatory framework the UK had helped build in the EU.

Both,Glen and Braddick emphasised the UK’s focus on global opportunities outside of the EU, wirth Braddick citing a deeper relationship with US regulators, alongside work with India, Japan, Singapore, China and Switzerland.

“I can’t account for how they will make those determinations. In the meantime, I […] and the government will continue to look at what’s the best way to regulate our financial services industry in the context of global relationships where a lot of growth is happening outside of the EU,” concluded Glen.

EU needs to build its own financial infrastructure

Meanwhile, McGuinness also highlighted the EU’s need to break its “dependence” on London.

“Our goal is not to move or steal business away from London, but rather to build our own infrastructures, and that’s an important nuance,” she said.

The 27-country bloc, she said, needs to limit the critical infrastructure that sits outside of the EU’s regulatory oversight to build a stronger and more resilient financial ecosystem.

“Where possible, we want to limit the concentration of critical infrastructures located outside of the EU. Disruption or divergence elsewhere can have systemic effects in the European Union, with potential spill-overs into the wider economy.”

“This is a question of financial stability,” McGuinness said. “The EU needs to reinforce its capacity to deal with new risks and responsibilities that follow from the UK exit from the EU.”

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