Barnier Relieves Opposition to May's Brexit Plan for the City of London

The EU chief negotiator softened his opposition to Theresa May's post-Brexit plan for the London financial services sector after UK negotiators acknowledged that Brussels would control Access from the city to the European markets.

The future of London as a global financial center is linked to its ability to serve as a gateway to Europe for international banks. British negotiators originally hoped that they could obtain a special arrangement with Brussels to continue to access it. Michel Barnier had rejected the new proposals of the British Prime Minister, in agreement with his cabinet earlier this month, because he believed that she suggested that an independent arbitrator should decide whether the British regulations were close enough to those in the EU. maintain market access – deprive the EU of its own "decision-making autonomy".

But last week, British negotiators told Barnier's team that his proposed arbitration system would not cover financial services.

The British authorities insist that Barnier's new guidelines are not a change from the original plan, signed by the cabinet at Checkers in early July, arguing that Brussels misinterpreted two different sections of the white paper from Ms. May.

But the recognition also stresses that Britain is seeking a more orthodox relationship with the EU than some advocate in the city and the Bank of England. May's model would see London treated as New York, Singapore and other "third country" financial centers by Brussels, which should certify that competing regulatory systems have an "equivalence" with the EU regulation .

London now accepts that Brussels can finally decide whether the UK's rules on financial services are equivalent to its own, with no other right of appeal – a position that actually confers the EU's veto power over some UK financial reforms if it wants to retain access. Two weeks ago, Mr Barnier told a private meeting of EU ministers that the arbitration system was a killer because, in practice, it would give Britain more influence on the equivalence decisions of the European Commission. union that she had as a Member State.

But in the days following this session, the United Kingdom clarified that its proposals for global governance arrangements, described in Chapter 4 of Ms. May's white paper, were not intended to cover Proposals on financial services outlined in Chapter 1. Arbitration is included in the Financial Services Plan.

Barnier's change of perspective was reported at a press conference with Dominic Raab, the British Secretary of Brexit, last week.

"We … agreed that future access to the market will be governed by autonomous decisions on both sides," Barnier said. "We recognized the need for this autonomy, not only when granting equivalence decisions, but also when withdrawing these decisions."

The city and the British authorities have long argued that a system of equivalence based on unilateral decisions rather than bilateral treaty obligations – creates too much uncertainty because, in theory, the decisions of The EU can be revoked with 30 days notice.

But even though the EU and UK positions on financial services are closer than before, many obstacles remain to reaching a final agreement on a system of agreements of "equivalence". These include mechanisms for coordinating rule changes, the strength of collateral and the conditions attached to equivalence agreements and the extent of market access.

The UK's new position on financial services highlights the magnitude of the change in Ms. May's white paper. This weakened the UK's initial goal of concluding a "mutual recognition" agreement with the EU to provide treaty guarantees on market access while allowing both parties to develop different regulations.

The less ambitious "equivalence" model aims to strengthen and improve the existing EU system, which gives limited access to the United States and Singapore, where their rules have a result similar to European standards

Barnier's position had evolved on the UK proposals, but the EU negotiator still sought to "rebadure" the level of influence that Britain was waiting for the evolution of the rules.

million. Raab noted that the "specific arrangements" Brexit had to be "adapted to our close and interdependent relationship in this particular sector". He added: "The commitment to open and fair trade must of course be respected on both sides."

Stephen Jones, CEO of UK Finance, a pressure group for UK lenders, urged negotiators to ensure that unilateral decisions of equivalence coordination to avoid problems and protect the stability of the market.

"Such autonomous decisions to grant and withdraw market access should not prevent the establishment of detailed prior consultation mechanisms between the parties," he said. "This would allow proposed regulatory changes to be fully discussed and understood by both parties in a measured way."