Eyeing access, Britain says it won’t undercut EU financial rules

© Reuters. FILE PHOTO: Participants hold a British Union flag and an EU flag during a pro-EU referendum event at Parliament Square in London

By Huw Jones

LONDON (Reuters) – Britain has no plans to rip up the rulebook governing its huge banking sector, financial services minister John Glen said on Wednesday, hoping this will allow London to keep its access to European Union markets.

The EU is the largest export market for Britain’s financial firms, but their access will be cut off if no new trading terms have been agreed by January when a post-Brexit transition period ends.

Before granting some access, the EU must assess whether UK-based banks, insurers and asset managers comply with rules that are “equivalent” or as robust as those in the bloc.

“There is no secret plan to deviate,” Glen told the House of Lord’s sub-committee on financial affairs.

“The core message that we have is we want to observe the highest standards,” he said.

Britain wants Brussels to conclude “positive” assessments by June, arguing it has put EU financial rules into UK law.

“We are equivalent to anyone’s eyes,” Glen said.

After equivalence assessments have been completed, Britain wants a financial services chapter in a broader free trade agreement with the EU to set out what happens if a potential divergence in financial rules emerges.

Incoming Bank of England Governor Andrew Bailey has said there is a need for such a mechanism to avoid “punch ups” over equivalence later on.

Equivalence is patchy and unpredictable compared with the current system of unfettered access known as “passporting”. Britain wants binding obligations to make equivalence more predictable.

Many UK-based financial firms have opened subsidiaries in the EU to avoid any potential disruption to clients.

Glen said it could be “unnecessarily provocative” to suggest at this point what rule changes could be made.

Britain has begun reviewing how financial services should be regulated in future.

“I want us to be world leaders in every bit of financial services. It’s not just about saying no, but about saying yes with appropriate safeguards,” Glen said.

There was a need to protect the revenues Britain earns from financial services, he said.

“We can’t have situation where we are in a less advantaged position to others, but we must do what’s right to the systemic security of our financial services industry,” Glen said.

Imminent government proposals on the future of British financial services will include provisions covering Gibraltar, access for overseas investment funds, and implementing bank capital rules from the global Basel Committee on Banking Supervision, Glen said.

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