The commission is planning tougher scrutiny of financial centres outside the EU that offer services to European clients, even as it insists that financial services will not be included in a Brexit trade deal with the UK.
Under such a scenario, the access to the EU market enjoyed by Britain’s financial services industry — home to about half the EU’s 6,000 investment companies — would be determined by whether the commission deems UK rules to be “equivalent” to EU standards, rather than by rights set out in a treaty.
The draft legislation, which will need to be approved by EU states, would introduce a more rigorous and intrusive approach to vetting equivalence for brokerages and investment banks outside the EU — largely because of Brexit.
A draft of the plans says that there is a “need to update the regulatory architecture in the EU” to address the “pivotal role played by UK investment firms in this area to date [and] the decision of the UK to withdraw from the Union”.
People briefed on the plans said they would mean that the UK would need to stay in close regulatory harmony with the EU if it was to benefit from the access provisions, not least because the commission has the power to withdraw equivalent status at any time.
Respect for rules on banker pay, notably the EU’s ban on bonuses of more than twice fixed salary, will be one factor that is sure to be taken into account in Brussels’ assessments, the people said.
Michel Barnier, the EU’s top negotiator, also maintains that the alternative route of preserving financial services access for the UK through provisions in a trade deal is not an option.
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