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Rees-Mogg said now isn’t the time for the Treasury and regulators to alter the rules as they put them in place in the U.K. over the next year. That time will come after Britain quits the bloc, he said.
“We’ve got a really big diplomatic job with the other European countries to persuade them that we’re perfectly decent people to deal with, and if we get ahead of ourselves and become very aggressive in the changes we make before we’re by treaty free of the shackles of the European Union, then I think that makes that diplomatic job harder to do,” Rees-Mogg said in an interview.
There’s “no way legally” not to convert the EU directive into U.K. law while the country is a member of the bloc, he said, but once Britain has left, “we can in all senses legally change any regulations that we want.” [...]
Outside the single market, U.K.-authorized firms would probably lose their right to sell services throughout the trading bloc. Instead, they’d have to rely on third-country arrangements in MiFID II and other financial-services acts for access that would be contingent on the European Commission’s recognition of U.K. rules as equivalent to those in the EU.
Limited Access
That will probably allow global banks based in the City of London to retain limited access to the EU’s single market after Brexit even if they lose full passporting rights, according to Moody’s Investors Service. While that would push up costs, the increase would be “manageable,” Moody’s said.
Barclays Plc has said that the third-country arrangements in MiFID II “could cover much of the relevant parts of our EU operations.”
But if the U.K. rules were altered after Brexit, equivalence could be threatened.
Rees-Mogg said the U.K. would have some latitude to make changes. Equivalence doesn’t mean you must have “exactly the same rules; you just have to have proper checks in place,” he said. “You can’t expect every country in the world to adopt the EU rule book, but you want to have reasonably open financial markets.” [...]
Futures Markets
“We’re certainly hoping that the U.K. will take a step back and look at MiFID II and some of the requirements that went well beyond the G-20 agreements, and frankly, look at regulations for markets, the futures markets which have not historically had any issues at all,” Scott Hill, chief financial officer of Atlanta-based Intercontinental Exchange Inc., said this month.
Yet many in the industry say their top priority is to preserve access to the EU single market for their trading operations based in London. And that may depend on how faithfully the U.K. adheres to MiFID II. [...]