Financial firms in the UK should be ready in case Britain does not reach a trade deal with the European Union by December, according to a senior regulator.
Britain leaves the EU next week, with “business as usual” transition period in place until December. Formal trade talks are set to begin in the coming weeks.
“Firms still need to ensure they are prepared for a range of scenarios that may happen at the end of 2020,” said Nausicaa Delfas, the Financial Conduct Authority’s (FCA) executive director of international.
British banks, trading platforms and insurers are hoping to be granted access to EU markets after the transition period ends under the EU equivalence system, which the bloc uses to grant EU market access to countries deemed to have comparable regulatory regimes to its own.
In a speech in London this morning, Delfas said that because the UK has already enshrined all EU financial rules into its law, it would have “the most equivalent framework to the EU of any country in the world”.
“As both the UK and EU are committed to open markets, there is also a strong rationale for both sides to discuss broadening their respective equivalence frameworks,” Delfas said.
In the coming months, Britain must also decide whether to grant EU-based financial firms can access UK investors under the same equivalence framework it has inherited by adopting EU law.
Delfas said this “provides a strong basis for the EU and UK to find each other equivalent across the full range of equivalence provisions”.
Although EU financial laws contain around 40 different equivalence provisions covering areas from insurance to share trading, access to EU markets remains more limited that the “passporting” granted to firms inside the bloc.
It emerged earlier this week that over 1,000 financial firms from the EU were planning to open offices in the UK after Brexit, in a bid to help counter the loss of business after passporting rights come to an end in December.
Although the EU has committed to completing equivalence assessments by the end of June, industry figures fear this could be overshadowed by broader trade talks between Britain and the bloc.
“We believe that equivalence decisions should be based on technical assessments,” Delfas said, adding that equivalence should be determined on the “outcomes” of rules rather than a need for regulations to be written identically.