A financial deal is crucial for Britain given that the city of London, which has been a critical artery for the flow of money around the world for centuries, is the world’s largest centre of international finance.
As per a British official, negotiators from the European Union and from Britain are close to hammering out a deal which could see London’s financial services hub getting basic access to EU markets.
The potential deal gives the United Kingdom the same level of access to the EU as some countries including Japan and the U.S.
“We are making progress,” said the official speaking on the condition of anonymity, while adding that the financial services deal would be based on the EU’s existing “equivalence” system.
The potential could upset Brexit-supporters who are members of Prime Minister Theresa May’s party who see Brexit as an opportunity to turbo-charge London as a global financial hub and abandon EU regulations.
Currently, as a member of the European Union, Britain’s financial institutions including banks, and insurers enjoy unfettered access to customers across EU’s bloc in all aspects of financial activities. Equivalence, however, covers a more limited range of business and excludes major activities such as commercial lending by banks.
A financial services deal may be expected if an overall Brexit agreement is struck this month, said the official.
On Wednesday, Britain’s Financial Conduct Authority stated, UK’s financial rules should stay aligned with those in the EU after Brexit; this is also basic condition for Brussels to grant equivalence.
Under the current system, Brussels can scrap an equivalence designation within 30 days in certain cases; although Brussels has yet to take such a step in the history of the EU, Britain has called for a far longer notice period.
According to a report from The Times, both side have decided that neither would unilaterally deny market access without first going through independent arbitration and providing a notice period significantly longer than 30 days.
Significantly, on Wednesday, Britain said there was no set date for Brexit talks to end; this goes against a letter by Brexit minister Dominic Raab that suggested a deal on the terms of its departure could be finalized by November 21.