U.K. Finance Firms May Face New Barriers to Doing Business in EU
(Bloomberg) -- The challenges faced by U.K. financial firms doing business in the European Union after Brexit could be about to get even tougher.
Markus Ferber, the European Parliament’s lead lawmaker on an overhaul of rules for investment firms, is seeking to limit the range of financial services that can be offered by firms from outside the EU, according to a draft report released on Friday.
U.K. banks and other financial companies are bracing for life without the “passport,” a license that allows them to serve clients in all EU countries. Once the U.K. leaves the bloc, they may have to rely on a system called “equivalence,” where access is granted by the European Commission if it determines that rules in a certain third country are good enough.
“Considering the U.K.’s exit from the EU, it’s even more important to have an effective third-country regime for investment firms,” Ferber said in an email. “That’s the only way to make sure there won’t be any regulatory arbitrage.”
Ferber aims to exclude two specific services from any future equivalence agreement: Dealing on one’s own account and the underwriting of financial instruments. That would mean that any firm wishing to offer these services -- for example, issuing debt and equity -- to an EU client would have to do so from a base in Frankfurt, Paris or elsewhere in the bloc.
“I want to make sure that investment firms from third countries that offer these services in the EU don’t gain a competitive advantage,” he said. It should be relatively straightforward for them to move these activities to a location within the bloc, he said.
The proposals are unlikely to be welcomed by U.K. firms that already regard the equivalence regime as flawed because it doesn’t cover all types of businesses. What’s more, equivalence assessments can be withdrawn by the Commission at short notice. Chancellor of the Exchequer Philip Hammond has called the system "wholly inadequate."
Ferber still needs to find common ground with other groups in the parliament before thrashing out a final version of the law with national governments.
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