Britain and the European Union have signed a financial services cooperation, marking a significant development in their post-Brexit relationship.
The memorandum of understanding (MoU) on regulatory cooperation was part of the UK’s agreement to exit the EU but was delayed due to disputes over trading arrangements in Northern Ireland.
However, with the resolution of those issues through the Windsor agreement, UK Finance Minister Jeremy Hunt and EU financial services chief Mairead McGuinness signed the MoU.
The MoU establishes a forum where regulatory, treasury, and European Commission officials from both sides will meet twice a year to discuss regulatory changes, international developments, and market risks.
The UK sees this as an important turning point and an opportunity to rebuild a constructive relationship with the EU in the financial sector.
Industry bodies, including TheCityUK, AFME, Investment Association, UK Finance, and the City of London, welcomed the signing of the MoU, emphasizing its potential to facilitate productive engagement between UK financial services and the EU. City of London policy chief Chris Hayward believes this resolution will benefit both economies.
A ‘small’ step forward
However, some experts remain cautious about the extent of the cooperation.
Speaking to Reuters, financial services lawyer Etay Katz said “Fundamentally, the EU is competing with the UK for financial business and thus we do not expect any meaningful concessions from the EU other than those dictated by self-interest or systemic considerations.”
While the signing of the MoU signals a step forward in UK-EU relations, it does not immediately result in major changes for the financial services sector.
The EU is preparing legislation to require banks in the bloc to shift the clearing of euro derivatives from London to other European centers, aiming to deepen its capital market post-Brexit. London has already lost its status as Europe’s top share-trading venue to Amsterdam.
The signing of the cooperation pact reflects a willingness on the part of both the UK and the EU to engage in ongoing discussions and regulatory cooperation in the financial services sector. It sets the stage for a new era of cooperation, but the immediate impact on market access and regulations is expected to be limited.