EU May Allow U.K. Banks Limited Post-Brexit Access, Barnier Says

  • Negotiator rules out ‘generalized equivalence of standards’
  • Talks on future relationship set to start within weeks
U.K. Should Have `Canada Plus Plus Plus' Brexit Deal, Italy Says

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European Union chief Brexit negotiator Michel Barnier maintained his hard-line stance over U.K. banks’ access to EU markets after Britain leaves, offering only a glimmer of hope that the bloc could be prepared to acknowledge some rules as equivalent.

Barnier, who has previously warned that British financial companies will lose so-called passporting rights that allow them to operate freely across the EU, went a step further on Tuesday saying there could be no blanket move to recognize the equivalence of rules across the two sides of the Channel. But, with talks on the future relationship set to start within weeks, he signaled some wiggle room.

A country that leaves the EU “can no longer benefit from a passport in the single market nor from a system of generalized equivalence of standards,” Barnier told an audience of Belgian business leaders in Brussels. However, there may be cases where the EU could “consider certain U.K. rules as equivalent, based on a proportionate and risk-based approach,” he said.

The inclusion of financial services in the U.K.’s post-Brexit arrangement with the EU has become one of the most contentious areas as the two sides get ready to negotiate about the future for the first time. European officials say that Britain’s red lines -- such as ending the free movement of workers from the EU -- make it impossible for them to allow British banks the same kind of access they get now.

The EU says the U.K. can hope only for a free-trade pact similar to the one the EU struck with Canada, rather than an arrangement that maintains stronger ties. Barnier rejected claims that the EU has included financial services in previous such deals.

“A free trade agreement may include provisions on regulatory cooperation -- this is the case with Japan” or in the form of “regular dialog like the one we have with the United States,” Barnier said. “But we have never given up our decision-making autonomy on everything related to regulation.”

The main difference between passporting and equivalence is that one is a right, while the other a privilege. Equivalence can be withdrawn at short notice, would probably cover fewer services and may mean the U.K. will have to accept rules it has no say over. Barnier’s latest remarks suggest that, with passporting seemingly off the table, even securing a version of regulatory “equivalence,” or a formal recognition by the EU that the U.K.’s rules and oversight of specific businesses are sufficiently tough, may be fraught with difficulty.

The U.K. hopes that when negotiations on a free-trade deal begin, it will be able to convince the EU’s 27 governments to back away from Barnier’s position.

Informal discussions between the EU and the U.K. on their post-Brexit relationship are set to continue before negotiations start in earnest once EU governments agree their common position on a transition arrangement later this month.

— With assistance by Alexander Weber

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