EU’s McGuinness Warns City of London ‘Change is Coming’

The European Union’s top financial-services official warned the City of London that any deal for the industry remains a distant prospect.

Mairead McGuinness, European commissioner for financial services, said in a Bloomberg TV interview Friday that the EU doesn’t have a fixed timeline for reaching a decision on financial services and emphasized that Brexit would inevitably hinder access to the bloc.

“Change is coming,” McGuinness said. “There is no recreating the single market for financial services when they have decided to leave the single market.”

EU’s McGuinness Warns City of London ‘Change is Coming’

The realities of leaving the EU have “come home to roost” for Britain, McGuinness said.

With the financial industry largely sidelined in the trade deal enacted when Britain finally split from the EU on Dec. 31, firms are racing to adjust to the rupture in European markets. London lost more than 6 billion euros ($7 billion) in daily stock trades to EU venues on Jan. 4, the first business day after the transition period.

Derivatives traders are routing more trades to New York and away from the continent altogether. JPMorgan Chase & Co., Goldman Sachs Group Inc. and other firms that relied on London hubs for decades have moved billions of euros in assets and thousands of staff to new offices in Frankfurt, Paris and across the bloc.

McGuinness signaled that the European Commission will first discuss a memorandum of understanding on regulatory cooperation with the U.K., due in March, before granting U.K. firms access to the single market. That so-called equivalence process will determine how much investment banking and trading business can stay in London, and so far the EU is in no hurry to offer it to Britain.

While the U.K. started 2021 with almost identical rules to the bloc following a post-Brexit transition period, British officials are contemplating modifications in a number of areas. Chancellor of the Exchequer Rishi Sunak has hinted the potential changes could become a “Big Bang 2.0,” akin to Margaret Thatcher’s deregulation in the 1980s.

Any such changes will be closely monitored by the EU, McGuinness said.

“We have heard words like deregulation, we know that Brexit was about moving away from what Europe has done across all sectors and possibly including the financial sector,” McGuinness said. “We do recall the past and light-touch regulation in financial services, and it did no one any favors.”

©2021 Bloomberg L.P.

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