A City-centric group has today added to the calls on the government to seek out a bespoke deal for access to the EU post-Brexit.
The International Regulatory Strategy Group (IRSG), which is co-sponsored by TheCityUK and the City of London Corporation and is chaired by former treasury minister Mark Hoban, is urging the government to seek out a tailor-made deal based on principles like mutual recognition and regulatory cooperation, rather than relying on the existing rules.
Since the UK chose to leave the EU in June, many in the financial sector have been worried that Brexit will spell the end for passporting, a complex set of rights which essentially allows UK firms to access the EEA markets and vice versa.
The mood music has since shifted to consider other rights that would allow access. However, IRSG's report argues EU's existing third country regime (TCR) and equivalence provisions would not provide the UK with stable long-term access to the Single Market, so the government would be wise to secure a bespoke solution.
"The analysis is clear: a new UK-EU relationship based on existing TCR and equivalence is not a viable option for the whole industry," said Hoban. "The TCRs are limited in coverage and uncertain in their availability, and too unpredictable.
"A bespoke solution with reasonable safeguards is the only way to prevent the fragmentation of financial markets and ensure continuity of service for firms and customers in the UK and across the EU."
Rachel Kent, global head of financial institutions sector at Hogan Lovells, added: "A bespoke arrangement establishing mutual rights of access would benefit both the EU and the UK by securing continuity for financial services and this report outlines the steps to achieve that, if the political will can be secured."
The IRSG report also calls on the government to nail down a transition agreement as soon as possible to provide firms with some much-needed clarity. In her landmark Brexit speech last week, Prime Minister Theresa May promised a "phased process of implementation" would be raised during the upcoming Brexit negotiations.
A report published earlier this month by law firm Norton Rose Fulbright on behalf of bipartisan Brexit research group the Financial Services Negotiation Forum argued a similar deal should be sought.
This earlier study noted traditional equivalence, which could essentially be pulled away overnight if the UK were to deviate from EU law further down the line, was not a "silver bullet" solution to losing passporting, so instead a "building blocks" model of equivalence should be secured, which is based on the broader principles of the rights rather than the finer details of the laws involved.