EU set to lose EVERYTHING! Brussels foot-dragging risks major City of London defeat
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Fund managers and bankers face a new set of “cliff-edge” risks when Britain leaves its post-Brexit transition from the bloc at the end of the year. Nausicaa Delfas, the Financial Conduct Authority’s executive director of international, said UK firms would still be able to offer data transfer and other services to customers in the EU after January 1. But she warned: “We should not assume, even if a deal is agreed, that it will mitigate outstanding risks in financial services.”
Earlier this week, Chancellor Rishi Sunak announced the Government would recognise swathes of EU financial services regulation as sufficiently stringent as the UK’s own standards – a so-called equivalence decision.
The move will allow UK-based banks and fund managers to continue accessing EU exchanges and services.
Mr Sunak insisted the Treasury was “acting unilaterally to provide clarity”.
Brussels bureaucrats have been dragging their feet over making a similar decision, claiming they are still concerned the Government will move away from EU standards.
The European Commission said it would only let the bloc’s banks access the UK if it is in the “EU’s interests”.
A spokesman said Mr Sunak’s recent announcement provided “no further clarity on the UK’s possible divergence from EU rules going forward, or about the UK’s future practices”.
“The Commission’s equivalence processes are autonomous. We consider equivalence decisions where they are in the EU’s interests,” they said.
Of the delay, Ms Delfas said: “In the absence of mutual equivalence, some firms will be caught by a conflict between the EU and UK derivative trading obligations, potentially hampering their ability to trade derivatives where they see fit.”
It would mean EU bank branches in London would have to follow multiple rules – which experts say causes uncertainty and potential disruption.
Currently, UK firms can send personal data into the EU, but the Commission has not yet completed its assessment of UK data protection standards.
Without a decision by Brussels, EU to UK data flows are expected to be disrupted after the end of the year.
Lawyers have claimed most of the post-Brexit risks will be more damaging to EU firms than their British counterparts.
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Simon Morris, a financial services partner with CMS, said: “Most UK firms have planned to avoid these cliff edges by setting up in the EU after Brexit, and putting the right terms in customer contracts.
“The real obstacle is more of a barrier reef down the Channel, since it’s the EU’s customers who will lose out being denied access to Europe’s largest capital market.”
Brexit campaigners accused Brussels of trying to “blackmail” Britain with threats of financial services.
Jayne Adye, of Get Britain Out, said: “The demands from the European Union to commit ourselves to aligning with EU regulation in perpetuity is an outrageous one without any grounding in precedent.
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“It is clear the Government is prepared to show goodwill to the EU. However, legal commitments of continued alignment are a step too far.
“For decades the EU has been trying to find a way to draw businesses out of London and promote financial hubs within the Eurozone. This is simply the latest attempt from the bureaucrats in Brussels to try and leverage Brexit talks to get their way.
“London is the financial capital of the world, and it will remain so after the transition period, regardless of what happens in the Brexit negotiations. The Government need not bow down to the EU’s pressure.”
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