Britain and EU strike cooperation pact for financial services

Huw Jones
·2-min read
FILE PHOTO: The City of London financial district is seen with office skyscrapers commonly known as 'Cheesegrater', 'Gherkin' and 'Walkie Talkie' seen in London, Britain

By Huw Jones

LONDON (Reuters) - Britain and the European Union agreed a new fin

ancial services cooperation pact on Friday that stops short of reconnecting the City of London to the bloc after Brexit.

"Formal steps need to be undertaken on both sides before the Memorandum of Understanding can be signed but it is expected that this can be done expeditiously," Britain's finance ministry said in a statement.

Once signed, the MoU will create the framework for voluntary cooperation in financial services by setting up the Joint UK-EU Financial Regulatory Forum, the ministry said.

Brussels has said an MoU will not lead automatically to financial market access for British firms after the country's full departure from the bloc on Dec. 31 left the City of London largely cut off from the EU.

In January, over 6 billion euros in daily share trading left London for Amsterdam, along with swathes of trading in derivatives. Brussels now targeting clearing of euro swaps, still dominated by the London Stock Exchange's LCH arm in London.

The agreement is similar to what the bloc already has with the United States for arranging regular, informal and non-binding meetings of financial regulators to discuss new rules and air any disagreements.

So far, the EU has declined to grant any long-term direct access for financial firms from Britain, saying this week that it was in no rush.

"Overall, for investors in UK financial services, a greater degree of cooperation between Europe and the UK can only be seen in a favourable light," said Alan Custis, head of UK equities at Lazard Asset Management.

"But it still feels as though the UK needs to continue to plough its own furrow in case there is a change of heart."

Jonathan Hill, a former EU financial services commissioner, said this week that Britain should not sit around for access, known as equivalence, but focus on making the City more attractive to international investors.

"Achieving a form of equivalence with the EU is essential but it should not detract us from the real challenge: making London and other financial capitals in Europe more competitive relative to the fast growing US and Asian markets," said Daniel Pinto, chief executive of Stanhope Capital.

(Reporting by Huw Jones, editing by Andy Bruce and William Schomberg, editing by Louise Heavens)