[...] Commenting on the research, Mark Boleat, Chairman of the Policy and Resources Committee at the City of London Corporation, said:
“What also became evident while undertaking this work is the lack of influence of countries not in the EU over legislation which applies to them if they trade in the EU. In my view, this serves as a sharp reminder that we would still have to adhere to this legislation, even if we were to leave the EU and wished to continue trading with the Single Market.” [...]
The paper has revealed that the EU has been slow in advancing regulations which allow countries outside the European Economic Area to trade effectively in the European Union, and it highlights that members of the EEA do not have the same rights as those with full membership of the European Union. Even third countries outside of Europe with preferential arrangements to access the Single Market have no more influence in the legislative process than third countries without such arrangements.
At the moment ‘passporting’ allows British-based institutions to sell into the rest of the European Union without having a branch there. Currently, the selling of financial services to the EU accounts for around £19.4bn of UK exports each year and 0.9% of GDP. It allows access to a Single Market of over 500 million consumers. As a non-EU member state, London would no longer be a suitable base for foreign managers hoping to market their funds across the EU. Along with UK authorised fund managers, they would be forced to seek authorisation in Luxembourg or Dublin in order to make use of those countries’ market access.
The research also found that the UK financial services regulator, the Financial Services Authority, and later the Financial Conduct Authority, has played a significant role in the early drafting stages of several pieces of key European legislation. Indeed in several instances the UK’s regulation is noted as being stricter than enacted EU regulations.
The report examined the following legislation and illustrated the successes of the UK in influencing it:
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Solvency II Directive
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The UK shaped EU legislation to match the UK’s and raise the standard European insurance capital requirements
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Alternative Investment Fund managers Directive (AIFMD)
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The UK preserved London as a global investment hub by preserving national private placement
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The European Market Infrastructure Regulation (EMIR)
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UK Government efforts ensured that there were no restrictive rules for clearing houses such as ICE Clear, and LCH Clearnet and discrimination of them for being outside of the Eurozone
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The Capital Requirements Directive and Regulation (CRD IV/CRR)
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Allowed the UK to set high capital reserve requirement for financial institutions in Europe while maintaining national discretion, and indeed higher rates for UK corporations
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Markets in Financial Infrastructure Directive and Regulation (MiFID II/MiFIR)
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The UK preserved the passporting regime set out in MiFID allowing continued access to 500m European customers
Full report
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