French Minister Says EU May Grant U.K. Limited Equivalence

A French minister close to President Emmanuel Macron says he thinks the European Union may grant some form of equivalence rulings that could allow the U.K.’s financial sector to do business across the continent -- but he warns they’ll be limited.

“There will probably be partial equivalence, probably by the end of the semester,” Clement Beaune, junior minister for EU affairs, said in an interview on Wednesday. That would be mid-2021.

French Minister Says EU May Grant U.K. Limited Equivalence

Beaune also warned the process wouldn’t mark a return to the kind of access the City of London enjoyed before Brexit. “They will be revocable, provisional, unilateral on the part of the EU. So it is not the same legal framework at all,” he said.

The pound rose after the comments were published, trading up 0.2% at $1.4172 at 2:55 p.m. in London.

Still, the possibility of even a limited form of equivalence being granted differs from some recent comments. Both Beaune and Michel Barnier, the EU’s chief Brexit negotiator, have previously warned the bloc won’t be hurried into granting U.K. financial firms free access to the bloc’s single market. Bank of England Governor Andrew Bailey has criticized the bloc’s approach.

Britain has grown increasingly frustrated over the EU’s reluctance to grant equivalence rulings that would enable London-based finance firms to operate in the bloc after a Brexit trade deal that largely sidelined the financial industry. The lack of an agreement has put London’s decades-long dominance of European finance under threat.

A spokesman for the EU commission pointed to earlier comments by the Commissioner for financial services Mairead McGuinness, who’s said that the discussion around equivalence was “not about restoring market access rights that the U.K. has lost, nor will it constrain the EU’s unilateral equivalence process.” McGuinness said the “U.K. intention to diverge requires a case-by-case discussion in each area.”

Beaune is a key member of France’s government. He worked on Macron’s 2017 presidential campaign before advising the French leader on EU Affairs. The 39-year-old played a central role in convincing Germany to raise common debt with the bloc last year, before being appointed minister in July. As a vocal defender of the union, he’s been especially involved in the Brexit talks. U.K. Prime Minister Boris Johnson’s cabinet even complained about his critical tweets to Macron.

After Brexit, the U.K. lost its “financial passport,” which allowed financial firms to essentially do business in any member state, without having to set up a local office and get approvals in each country. By contrast, equivalence is a piecemeal decision allowing Britain to sell some services into the bloc.

There’s a wide array of different rulings for different financial products, and Beaune called for a “rigorous review” by the EU, segment by segment, of the U.K.’s commitments on financial regulation. He insisted there was “no emergency” for the EU to hand them over.

“Brexit doesn’t weigh on the U.K.’s competitiveness, nor on its financial sector’s,” Beaune said “but it does create uncertainty.”

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