German banks demand equivalence deal with UK

The European Union is coming under pressure from German banks to reach a post-Brexit deal with the UK to enable financial services across the continent to continue to act smoothly when the transition period ends on December.

Skyline with the 155 meter high twin towers Deutsche Bank I and II in Frankfurt.

David Sapsted

25 June 2020

The Association of German Banks (BDB) is demanding Brussels prioritise a deal over equivalence for the financial sector, warning that if no agreement is reached, both the EU and UK will suffer.Without an equivalence arrangement, British financial firms without a hub in Europe will be denied access to the continental market, and vice versa.“Clarity regarding future market access arrangements should be provided at the earliest possible date,” the BDB said in a position paper, which also called for a comprehensive free trade agreement to be agreed.

UK Finance supports reciprocity

A spokesman for the trade body UK Finance said, “The Association of German Banks is right to call for full and reciprocal financial services access to be established as early as possible in the EU-UK trade deal.“Strengthening the arrangements for future cross-border trade in financial services, including equivalence mechanisms, would provide stability and certainty for businesses in the EU and UK. These arrangements do not need to be contained solely within a free trade agreement and can build on the long-standing regulatory relationships and supervisory cooperation that already exist.”

UK Treasury prioritising equivalence

The UK Treasury has confirmed that it is prioritising equivalence with regimes currently covered by EU regulation, in a bid to ensure a smooth exit at the end of the transition period.Economic Secretary to the Treasury John Glen said in a letter this week to the House of Lords' EU Financial Affairs Sub-Committee that concluding equivalence assessments would be in the UK and EU’s mutual interest.Mr Glen added that the Treasury could “see no reason why the UK and EU will not be able to find each other equivalent across all existing equivalence regimes”.

Pinsent Masons: added emphasis on post-Brexit arrangements

Elizabeth Budd, a financial services regulation expert at law firm Pinsent Masons said there was now an added emphasis on post-Brexit arrangements following the government’s recent confirmation that it would not seek an extension to the Brexit transition period.“Whilst it may seem from a commercial perspective that the UK is equivalent to the EU in those areas covered by the various financial services related directives, to obtain that formal standard and have confidence that it will not be easily removed will require sensitive negotiation,” she said.“John Glen also points out that the EU and UK will be autonomous in their ability to develop their own regulatory regimes which does raise the issue of eventual divergence, which would in turn bring equivalence back under the microscope."Chancellor of the Exchequer Rishi Sunak said on Tuesday that comprehensive equivalence was in the best interests of both parties, but also indicated there would be some changes to UK rulebooks.