BRUSSELS (Reuters) – European Union assessments on whether to grant market access to UK banks and other financial firms will not be completed in time for January and interim measures are being considered, a European diplomat.
Britain’s unfettered access to the EU under transitional agreements ends on December 31, leaving the City of London facing being cut off from its largest export customer, worth about 26 billion pounds per year.
The EU’s assessments are carried out by the European Commission, which declined to comment, under the EU’s system of direct access to financial markets, known as equivalence.
“The European Commission told member states on Thursday that equivalence decisions will not be ready from January 1,” said the EU diplomat, who took part in the closed-door briefing.
“They are now looking to address the gap,” said the person, who spoke on condition of anonymity given the sensitivity of the discussions.
Financial services are not part of the ongoing discussions between Britain and the EU on a free trade agreement, but are treated separately under the equivalency system.
The EU grants access to foreign financial firms if it believes their domestic rules are ‘equivalent’ or as strong as the bloc’s own regulations and, in Britain’s case, likely will remain so.
The EU executive said it would only grant equivalence if it was in the EU’s interest to do so.
He also said he wanted more information from Britain on its intentions to deviate from EU rules after next month, but Britain said it had fully completed the questionnaires of the block.
Brussels has granted temporary equivalency derivatives to London clearinghouses, but in the absence of equivalency, EU banks will have to stop using UK platforms to trade euro-denominated swaps and equities at from January.
Britain and the EU had said they would complete equivalency assessments by the end of June, a deadline that was missed.
The lengthy process prompted Britain this month to unilaterally grant UK market access from January to EU financial firms in certain activities.
Reporting by Gabriela Baczynska, written by Huw Jones, editing by Mark Heinrich and Alexandra Hudson