The EU and the UK have agreed to cooperate further on financial services. It will create a forum where the EU and the UK may meet twice annually to talk about financial standards and regulation.

The long-awaited action is viewed as a sign that the UK is ready to cooperate with the EU more closely. The UK and EU financial markets are “deeply interconnected,” according to Chancellor Jeremy Hunt, thus developing positive relations is in both parties’ best interests.

In response to the UK losing unrestricted access to EU markets as a result of Brexit, the memorandum of understanding that is being signed was initially described in the UK-EU Trade and Cooperation Agreement.

The text, which was released last month, is essentially a list of broad common goals. But calling this a “agreement” is inaccurate. It does not imply that the UK will agree to follow EU regulations or give in to any prior requests Brussels may have made, such as shifting the processing of some financial products denominated in euros out of London.

To discuss “voluntary regulatory co-operation on financial services issues,” both parties are committed to a regular twice-yearly meeting.

“Both sides will share information, work together towards meeting joint challenges and co-ordinate positions,” the memorandum says.

The measure, according to European Commission spokesperson Daniel Ferrie, “will set up a forum to facilitate dialogue.”

However, he added: “It does not restore UK access to EU, nor prejudges adoption of equivalence decisions.” If the laws regulating the sector are found to be “equivalent,” foreign enterprises may be permitted access to the EU in some areas of financial services.

Following the signing of the EU-UK Memorandum of Understanding on Financial Services Regulatory Cooperation, Chancellor Jeremy Hunt (L) and EU Commissioner for Financial Stability, Financial Services, and Capital Markets Union Mairead McGuinness clasp hands.

The Windsor Framework, which the UK and the EU signed in March, intends to simplify the process of goods entering in Northern Ireland from Great Britain by minimising the number of inspections required. The accord was viewed as an indication that ties between the UK and the EU were getting better.

The signing of the financial services memorandum, which comes after the Windsor Framework, is another indication that the UK has changed its attitude towards the EU from that of former Prime Ministers Liz Truss and Boris Johnson to one that is more accommodating and pragmatic. It may also indicate greater agreement on future regulation. The book, however, avoids bringing up this subject at all.

Speaking after the signing of the memorandum, Hunt said it was an “important turning point”, while the EU’s financial services commissioner, Mairead McGuinness, said the Windsor Framework had “allowed us to move forward in a spirit of partnership, based on trust, co-operation and delivering benefits for people on both sides”.

“This MoU [memorandum of understanding] we’ve just signed is one example of the benefits of partnership,” she added.

With less than 10,000 jobs moving than anticipated, the UK has maintained its status as Europe’s most significant financial centre and exported 37% of its financial services to the EU in 2019.

The signing of the MoU “sets the stage for a new era of cooperation with our EU partners,” according to Chris Hayward, policy chairman of the City of London Corporation.

“We hope this agreement will help ensure both our financial services sectors remain open for business.”

According to officials at the Treasury, the Windsor Framework’s approval prepared the way for the passage of this memorandum. This is encouraging for more intensive work on some of the unfinished post-Brexit arrangements, not least the stricter restrictions for rules of origin that are scheduled to take effect for automakers.

However, in reality, it is unlikely to have a substantial impact on financial services very soon. There are probably only three forums left until the next election.

(Adapted from TheGuardian.com)

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