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09 January 2018

Reuters: Barnier says EU may treat some UK financial rules as equivalent after Brexit

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The European Union could treat some British financial regulation as equivalent to EU law after Brexit, but would not give financial firms a general “passport” to do business in the single market, the EU’s chief Brexit negotiator said.

In a speech at a Belgian business event, Michel Barnier reiterated that once Britain left the EU on March 29, 2019, its firms would lose the benefits of doing business across a market of 440 million people.

“We will have the opportunity to treat some UK rules as equivalent, based on a proportionate and risk-based approach, including financial stability, which remains our primary concern,” Barnier said.

The City of London would like to retain the easy access to the EU market it has now, but Barnier said this was not possible.

“Its (Britain‘s) financial services cannot benefit from a passport in the single market nor from a system of generalized equivalence of standards,” Barnier said.

Jeremy Browne, the City’s EU envoy, said on Monday the EU’s “one-way” system of equivalence, whereby the EU grants market access to foreign banks if they operate under similar rules to those of the bloc, was a non-starter for most in the City.

“People are quite hardline about not having equivalence as the final state,” Browne said.

Barnier, however, said the integrity of the single EU market was sacrosanct and that much depended on the scope of regulatory divergence between the EU and Britain after Brexit.

“This is neither punishment nor revenge,” he said. “Just that we are masters of our rules and how they are implemented. The United Kingdom, which wants to regain its autonomy of decision-making, must respect ours.” [...]

Full article on Reuters

Speech by Michel Barnier at the Trends Manager of the Year 2017 event

[...]Since day one, I have asked – and I have asked myself – three questions. And it is in the answer to these three questions that we will see the form of our future relationship.

I – Does the UK want an orderly withdrawal or a disorderly withdrawal and is it ready to assume the immediate consequences of its decision to leave the European Union?

We have obtained a positive answer to this first question. On 8 December we reached an agreement with the UK that represents a significant step towards an orderly withdrawal.

In other words, the risk of a disorderly withdrawal has receded, even though we must remain prepared for all options. [...]

II – What kind of future relationship does the UK want with the European Union?

We don't yet have the answer to this question. However, we can proceed by deduction, based on the Union's legal system and the UK's red lines. By officially drawing these red lines, the UK is itself closing the doors, one by one.

The British government wants to end the free movement of persons, which is indivisible from the other three freedoms. It has therefore indicated its intention of leaving the Single Market.

The British government wants to recover its independence to negotiate international agreements. It has therefore confirmed its intention of leaving the Customs Union.

The UK no longer wishes to recognise the jurisdiction of the Court of Justice of the European Union, which guarantees the application of our common rules.

It follows that the only model possible is a free trade agreement, which could obviate the need for trade barriers, such as customs duties, and could facilitate customs procedures and product certification.

This will of course be adapted to the specificities of the relationship between the EU and the UK, in the same way that our agreement with Canada is not identical to our agreements with Korea or Japan.

But one thing is clear: a free trade agreement, however ambitious, cannot include all the benefits of the Customs Union and the Single Market.

For example, with regard to financial services, a free trade agreement may include provisions on regulatory cooperation – as is the case with Japan. This regulatory cooperation may also take the form of a regular dialogue like the one we have with the United States.

But we have never given up our regulatory autonomy.

The regulatory framework we have constructed as a Union of 28, including the United Kingdom, learning from the financial crisis, is extremely precise. We have developed a single rulebook and more integrated European supervision, which guarantee financial stability, protection for investors, market integrity and a level playing field.

A country leaving this very precise framework and the accompanying supervision gains the ability to diverge from it but by the same token loses the benefits of the Internal Market. Its financial service providers can no longer enjoy the benefits of a passport to the Single Market nor those of a system of generalised equivalence of standards.

This is not a question of punishment or revenge; we simply want to remain in charge of our own rules and the way in which they are applied. As it seeks to regain its decision-making autonomy, the United Kingdom must respect ours.

Where allowed by our legislation, we will be able to consider some of the United Kingdom's rules as equivalent using a proportionate and risk-based approach, in particular for financial stability, which will remain our main concern. [...]

We are waiting for the United Kingdom to confirm, over the coming months, that we are working towards an ambitious free trade agreement and to tell us in which other areas it would like to cooperate. [...]

Whatever the exact framework of our future relationship – which will be the subject of a political declaration in October when we finalise our withdrawal agreement – we must allow businesses and public administrations the time to prepare themselves for it.

This is the aim of the transition period requested by the United Kingdom, for which the Commission proposed to the Member States a period of 21 months, from the withdrawal of the United Kingdom on 29 March 2019 to 31 December 2020.

That said, the real transition period has already started. My responsibility is to tell you the truth.

A trading relationship with a country that does not belong to the European Union will never be frictionless. Take VAT statements, for example. Or imports of live animals and products of animal origin, which are subject to systematic checks at the border of the EU when they arrive from third countries. [...]

It is therefore important that all businesses clearly analyse their exposure to the United Kingdom and are ready to adapt their logistical channels, supply chains and contractual clauses, including in the financial services sector. [...]

III Does the United Kingdom want to stay close to the European regulatory model or to distance itself from it?

This is an important decision because the European regulatory framework is underpinned by key societal choices that are dear to us: our social market economy, health protection, food security, and fair and effective financial regulation.

There will be no ambitious partnership without common ground on fair competition, State aid, guarantees against tax dumping and social and environmental standards. I know that Marianne Thyssen, like President Juncker, the European Parliament and the Member States, is being particularly vigilant in this respect.

Because for the first time in the history of our trade relations, it is not a question of encouraging regulatory convergence but of managing divergence.

This question is equally important from a political point of view since the future agreements with the United Kingdom will most likely be mixed agreements which, in addition to the approval of the European Parliament, will require ratification by the 27 national parliaments and doubtless some regional parliaments too.

[...]It is the time for a new resolve and this new resolve is more important than Brexit.

Full speech

© Reuters

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