The EU’s head of financial regulation has rejected the UK’s calls for the City’s future access to the bloc’s markets to be settled by the end of June, warning that Brussels’ decision will be based on the extent Britain wants to deviate from EU rules.
UK chancellor Rishi Sunak last month called on the EU to make quick progress in the granting of so-called equivalence rights for British financial services.
In a letter to EU Commission executive vice president Valdis Dombrovskis, Sunak argued that the UK and EU “should be able to conclude equivalence assessments swiftly” given that they currently have the same financial regulations.
However in a reply seen by City A.M., Dombrovskis said that the EU had never agreed to reach a decision by 30 June.
In the letter, dated 13 March, Dombrovskis says that the political declaration section of the Brexit deal reached last year requires both sides to try to complete their equivalence assessments by the end of June, not to make final decisions by then.
Dombrovskis also said that the EU’s equivalence assessment of the UK “will have to be forward-looking” and would take into account “overall developments, including any divergences of UK rules from EU rules”.
The EU has repeatedly rebuffed UK negotiators’ calls for Britain’s future access to the bloc’s markets to be based on a regulatory framework other than equivalence, which is dependent on unilateral decisions by the EU and can be rescinded with just 30 days’ notice.
Equivalence is based on the EU’s assessment of other countries’ regulatory and supervisory frameworks. Those whose standards are deemed to be as rigorous as the bloc’s can be granted access to EU markets covering crucial areas including trading and investment services.
In the Brexit agreement’s political declaration section, both sides said they would “endeavour” to finalise which parts of the City would be judged equivalent by the end of June, but tensions rose last month after the EU’s published negotiating objectives did not commit to the timeline.
Sunak last month urged Dombrovskis to honour the date, writing: “I see no reason why we cannot deliver comprehensive positive findings to the June timeline”.
The chancellor added that he and his staff were “ready to begin working with your team in a structured way”.
However Dombrovskis’s reply said the Commission was “mapping the equivalence areas internally”, adding that his teams “will reach out to yours soon” to collect evidence on “the UK frameworks applying after the transition period”.