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An EU official said that the British charm offensive, rolled out this week to reassure European investment banks and other firms that they will not face big new burdens after the UK leaves the bloc, was less generous and more heavy-handed than the current EU system of equivalence.
This allows financial institutions outside the EU to sell services within the bloc as long as the European Commission deems that they are subject to home-country regulations that are “equivalent” to the EU’s own rules.
The official said that the proposals by the Bank of England and the British government did not go as far as the EU’s system, adding that it “is not equivalence plus. If anything it is equivalence minus.”
The British plans were devised to counter the risk that European financial institutions might reduce activities in the UK in favour of EU centres such as Frankfurt and Paris after Brexit.
Like the EU’s own system, Britain’s model would make access conditional on the other side — in this instance the EU — maintaining robust supervision and regulation of its financial sector. But the EU official said that some of the UK requirements — on issues such as information sharing between EU and British supervisors — went beyond what Brussels requires.
The UK will “require quite significant oversight of the parent [company],” the official said.
The EU system also allows substantial cross-border provision of services, meaning no local establishment is needed.
By contrast, the UK proposals are based around the idea that EU investment banks and other non-deposit taking institutions will be able to keep operating in the UK if they maintain branches. This would absolve them of the need of setting up locally regulated and supervised subsidiaries — a more complicated and expensive endeavour.
The streamlined access proposed by Britain would be conditional on the EU making sure European financial supervisors share information with UK authorities, and on Europe maintaining high standards of regulation and supervision. [...]
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