As the deadline for the UK’s departure from the European Union approaches UK Chancellor Rishi Sunak has fired the first shots in the battle over regulatory equivalence.
He told the House of Commons that the UK will provide equivalence for EU firms after 1 January and was now urging the EU to follow suit.
The issue of passporting for financial services has been a sticking point throughout the Brexit negotiations with many in the City of London believing the EU had deliberately been refusing to retain the current passporting arrangements to promote Paris or Frankfurt as a replacement as Europe’s preeminent financial services sector.
However, there remain many firms in the European Union which rely on the City of London for financial services and the move is designed to put further pressure on the European Union to restore the free movement of financial services, without the need for EU domiciled entities.
Mr Sunak told MPs: “I remain firmly of the view that it is in both the UK and EU’s interests to reach a comprehensive set of mutual decisions on equivalence.”
In a statement the UK Treasury said following the UK’s departure from the EU, the government’s approach to financial services will be guided by “what is right for the UK and one of its most productive and innovative sectors”.
In a statement the Treasury said: “The UK’s attractiveness as a global financial centre is underpinned by its openness to international markets and robust regulatory standards.
“Equivalence is one of the UK’s one of the central mechanisms for managing cross-border financial services activity with the EU and beyond.
“To provide certainty and reassurance to firms and international partners, the Chancellor today announced the publication of a guidance document setting out the UK’s approach to equivalence with overseas jurisdictions – a technical outcomes-based approach that prioritises stability, openness and transparency.”
The Treasury said key to these announcements were the package of equivalence decisions to the EU and EEA member states.
“By announcing as many decisions as possible before the end of the transition period, the UK is delivering on its commitment to be open, predictable and transparent, even in the absence of clarity from the EU on their approach, and providing certainty to firms in both the UK and EU,” it added. “The government is not ruling out further equivalence decisions where these are in the UK interests and remains open to further dialogue with the EU about their intentions.”
Mr Sunak said: “We are starting a new chapter in the history of financial services and renewing the UK’s position as the world’s pre-eminent financial centre. By taking as many equivalence decisions as we can in the absence of clarity from the EU, we’re doing what’s right for the UK and providing firms with certainty and stability.
“Our plans will ensure the UK moves forward as an open, attractive and well-regulated market, and continues to lead the world in pioneering new technologies and shifting finance towards a net zero future.”
Allie Renison, head of EU and trade policy at the Institute of Directors said: “The Chancellor is making the point that the UK is willing to take the moral high ground, put trade first and be more flexible – whether a deal is reached or not.”
The Chancellor also announced a wave of new green initiatives to drive the UK’s climate change agenda
To help the UK meet its 2050 net zero target and other environmental objectives, the government will issue its first Sovereign Green Bond in 2021 subject to market conditions – and intends to follow up with a series of further issuances to meet growing investor demand for these instruments. These bonds will help finance projects that will tackle climate change, finance much-needed infrastructure investment and create green jobs across the country.
The UK will become the first country in the world to make a Task Force on Climate-related Financial Disclosures (TCFD) aligned disclosures fully mandatory across the economy by 2025, going beyond the ‘comply or explain’ approach.
The joint Government Regulator TCFD Taskforce will today publish its interim report with a roadmap for implementing mandatory disclosures, many of which will come into force by 2023.
“The upcoming rules and regulations will capture a significant portion of the economy including listed commercial companies, UK-registered large private companies, banks, building societies, insurance companies, UK-authorised asset managers, life insurers, FCA-regulated pension schemes and occupational pension schemes,” added the Treasury.