U.K. to Face Tight EU Leash on Finance Regulations After Brexit
U.K. to Face Tight EU Leash on Finance Regulations After Brexit
(Bloomberg) -- The U.K. will continue to face scrutiny by European Union regulators after Brexit if it wants to access financial services in the region, according to the bloc’s executive arm.
The European Commission on Monday laid out its most recent approach to the so-called equivalence system, which allows foreign financial firms to do business in the EU if regulations in their home country are deemed tough enough. Once approved, the EU will put an emphasis on monitoring foreign regulations to make sure standards are upheld, it said in a report.
“Reliance on an outdated equivalence finding may bring new risks to the EU financial system,” the commission said, without specifically mentioning the U.K. “Adequate equivalence monitoring needs to be assured by the commission and European Supervisory Authorities, acting in cooperation in accordance with their respective mandates.”
The EU has made it clear that the equivalence system is all that’s on offer for financial firms in Britain after Brexit. U.K. firms have said the fact that recognition could be withdrawn at short notice is one of several shortcomings of the EU system, and they’re in the process of shifting more then 1 trillion euros ($1.11 trillion) in assets into the euro area to maintain access to clients.
The commission said that a review could indeed lead to the unilateral withdrawal of market access, but it also said the process involves “careful dialogue with the third-country authorities concerned.”
As an illustration of what happens when countries fail to adapt to changing EU regulations, the commission said it will cut off market access for credit rating agencies in Argentina, Australia, Brazil, Canada and Singapore. These countries chose not to implement rules from 2013 that were meant to make the market more transparent and improve the quality of the ratings process.
To contact the reporter on this story: Alexander Weber in Brussels at aweber45@bloomberg.net
To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Andrew Blackman, Nikos Chrysoloras
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