The UK and EU have agreed the terms for future cooperation on financial services between the two jurisdictions.
“Formal steps need to be undertaken on both sides before the Memorandum of Understanding (MoU) can be signed but it is expected that this can be done expeditiously,” The Treasury said in a statement.
“The MoU, once signed, creates the framework for voluntary regulatory cooperation in financial services between the UK and the EU. The MoU will establish the Joint UK-EU Financial Regulatory Forum, which will serve as a platform to facilitate dialogue on financial services issues.”
UK and European officials have been locked in discussions about the future of financial services since January.
The City lost its pre-Brexit access to EU markets on 1 January when the UK left the single market and customs union.
Brussels can grant direct market access for foreign financial services firms if it deems their home market rules are similar to the EU’s own standards, a designation known as equivalence.
Brussels said an MoU will not automatically lead to market access for UK firms after the transition period ended at the end of last year. The agreement is similar to the existing deal between EU and the US and the bloc has declined to grant any long-term direct access to British firms.
‘Far cry from regulatory equivalence’
Varghese Thomas, president and chief operating officer at TradingScreen said: “A far cry from a recognition of regulatory equivalence, but a step in the right direction nevertheless. Although exactly what a Memorandum of Understanding will look like in practice is anyone’s guess.”
“If it is the precursor to open and detailed dialog between EU based firms and the City then that can only be a good thing. But the mere fact that full equivalence seems a way off makes concrete decisions the on finer details of market infrastructure, including the future of euro clearing, more complex.”