Would you believe me if I told you that Michel Barnier has recently said that “the EU and the UK agree on the overall objectives of sound and resilient banks and financial markets?
“It would be nothing short of a disaster if our agreements on broad principles are undermined by the detailed rules and their implementation being just too different. This is why we want to include regulatory cooperation on financial services…”
Anyone reading this would think that, contrary to his pre-Christmas statements, Barnier has recognised the mutual benefit of a deal in this area. Or that I’ve doctored the quote.
Both are true. I changed one letter. In the original quote, Barnier said “US” and not “UK”.
The statement was uttered over three years ago, during the TTIP negotiations.
Barnier was, at the time, leading attempts by the EU to get financial services comprehensively covered in an EU/US TTIP deal.
The EU feared competition from US banks with looser regulation and lower capital costs.
Lessons from America
But they also saw the economic advantages for the EU economy of opening up access for European business to greater pools of international capital and expertise, as well as the chance to sell into the large US market.
The industry on both sides of the Atlantic supported this position.
In the same speech, Barnier also said that “cooperating on regulation is the only way to ensure global financial stability while maintaining open markets.”
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Can this be the same man who has declared that financial services have no place in any UK-EU trade agreement?
A change in the US administration, as well as other unrelated issues, may have put an end to TTIP for now.
But the arguments Barnier made in 2014 about regulatory cooperation were absolutely right then and they are absolutely right today.
Trade beyond Brexit
Indeed, the idea of mutual regulatory recognition as a basis for UK-EU trade, first proposed by the International Regulatory Strategy Group and now adopted by the UK government as the best approach to frictionless trade beyond Brexit, is rooted in what the EU was seeking with the US.
A Brexit deal based on mutual regulatory recognition would allow for ongoing regulatory alignment between the UK and the EU, requiring our regulators to continue to work closely on various emerging issues.
It would also provide for a mechanism to manage any future divergence.
As David Davis said just last week, and Barnier said in 2014, it would result in a regulatory “race to the top, not a race to the bottom”.
“We will of course never agree on everything and neither jurisdiction should be able to force the other to follow its rules.” That was Mr Barnier again.
The question is, when we agree on so much, surely a deal which includes financial and related professional services is not only possible, but essential for both the UK and the EU?
We have consistently argued that the winners of such an approach would be customers, shareholders and employees.
Let’s hope Michel Barnier listens to his own wise advice.
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