01 March 2023

FT: Windsor deal opens door for progress on post-Brexit financial regulation

Brussels has opened the door to closer co-operation on the regulation of financial services with the UK in a sign that easing political tensions after a deal on Northern Ireland could unlock other disputes.

A “memorandum of understanding” on regulatory issues has been stalled for two years because of the fractious relationship between the two sides. But a senior EU official indicated that Brussels was now willing to sign the MoU after the two sides agreed to the Windsor framework to improve trade between Great Britain and Northern Ireland. “It would require some discussions with the UK. For us, it is just a question of ‘one thing at a time’,” he added. “We will turn to the MoU on financial services soon.”

There was no timeline yet, the official added, but the deal on the Northern Ireland protocol provided an opportunity to exploit the “full potential” of the trade and co-operation agreement between the two sides. British government insiders said they had not been contacted by the EU about the MoU, but added that any move forward would be welcomed. A Treasury source said: “We want to progress the MoU, and welcome renewed and positive momentum on the EU’s side.”

The MoU was agreed in March 2021 but its signing has been held up by disputes between London and Brussels over post-Brexit trading arrangements in Northern Ireland. It will establish a joint UK-EU financial regulatory forum, a platform for regulators to resolve financial services issues.

The MoU is also expected to become the framework for discussions on how to move forward with any future equivalence determinations, which would recognise UK regulation as matching EU rules. The text of the unpublished MoU is unlikely to change, EU officials say. But EU members will have to approve it before signature.

The Treasury said that building a constructive relationship would benefit both the UK and EU financial markets. Financial services executives hope that the Windsor framework struck this week will mark a wider reset for EU-UK relations. Miles Celic, head of TheCityUK, the industry group, said he expected the deal to “unlock a number of connected issues that were caught up with the Northern Ireland deal such as the memorandum of understanding on financial services”. He added: “We think it’s very encouraging. Financial services was impacted by unrelated politics over Ireland but now we can progress the economic and commercial side which will benefit both the UK and EU.”

British ministers have also indicated to City bosses in meetings in recent weeks that a Northern Ireland deal was expected to unlock talks in areas such as financial services, according to one person involved in the talks...

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