Barnier Signals More Delay for London Banks Eyeing EU Market

Michel Barnier, the European Union’s chief Brexit negotiator, warned the bloc won’t be hurried into granting U.K. financial firms free access to the bloc’s single market.

“Equivalence decisions are, and will remain, unilateral of each party and aren’t subject to negotiation,” he said at the European Business Summit in Brussels Thursday. “We will take no risk about financial stability.”

The comments underline the gulf between the two sides over so-called equivalence -- or whether the EU will determine Britain’s rules are robust enough to allow its financial services firms seamless access to the bloc. Securing equivalence would allow London-based finance firms to continue to service the single market from their existing bases in the U.K. capital.

European regulators, though, are keen to prise business away from the City of London, which was excluded from the Brexit trade deal despite contributing about a 10th of all tax receipts in the U.K.

Dominance Eroded

Since Britain left the EU’s single market and customs union on Dec. 31, London’s dominance in areas like equity trading has been eroded. Amsterdam overtook London as Europe’s largest share trading center in January.

Bank of England Governor Andrew Bailey criticized the bloc’s approach on equivalence Wednesday, describing it as a standard the EU wouldn’t “agree to be held to itself.”

Barnier also warned finance firms of the consequences of trying to improperly preserve their previous business arrangements.

“We know that there are attempts to circumvent the new rules,” he said. “Needless to say the national authorities of the EU, in each and every country, and the EU authorities themselves will be very, very vigilant in the next few weeks and months and I recommend everyone to be careful.”

ESMA Warning

In January, the Paris-based European Securities and Markets Authority said some companies outside the bloc were skirting rules on solicitation, which allow firms to do business for an EU client only when the customer has sought it on their own accord. In some cases, firms are trying to circumvent Mifid II regulations by using online pop-up “I agree” boxes that claim transactions are made on a client’s exclusive initiative, ESMA said.

European regulators are increasingly taking a hard line with some banks, expecting them to move people in spite of Covid travel restrictions if virtually all their EU business is still done from London. Some regulators have been regularly checking whether lenders’ entities on the continent are fully operational and adequately staffed.

Barnier’s comments reiterated the determination of Brussels to show the cost to leaving the world’s largest trading bloc.

“Brexit means Brexit,” Barnier said. “We will have to face many consequences.”

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