The forum will not decide on financial market access, but it is viewed as critical for rebuilding relations after a tense Brexit divorce. The European Commission said internal work on approving the forum was ongoing. A pressing issue for Britain is that EU permission for the London Stock Exchange to keep clearing euro derivatives for EU customers expires in June next year, potentially fragmenting a major market.
“We really hope that that is expedited because once that memorandum of understanding is agreed we can get on with establishing our routine ways of engaging,” Katharine Braddick, director of financial services at Britain’s finance ministry told TheCityUK’s annual conference. Both sides have agreed to start a dialogue via an informal forum for discussing financial rules but it has yet to go live.
The forum would put the UK’s relationship with the EU on a “reliable, transparent and understandable footing” to give business certainty, she said. Banks and other financial firms that used London as a gateway to Europe have set up units in the EU to avoid disruption for EU clients. Billions of euros in daily euro stock and derivatives trading have already left London for the EU.
“What has made the EU so successful is its openness to the world and being able to embed itself in global ecosystems.” EU firms should be able to access the same liquidity, services, data and technology capabilities as their peers in respect to clearing, Schwimmer said. “I think it’s critically important for the EU to remain open and to resist the protectionist temptation,” London Stock Exchange Chief Executive David Schwimmer told a separate European Financial Services conference.
The EU wants to directly supervise euro clearing and bolster its “strategic autonomy” to avoid reliance on the City in financial services. The Commission is asking banks and asset managers how quickly they can shift trillions of euros in derivatives clearing from London to Deutsche Boerse (DB1Gn.DE) in Frankfurt and if legislation is needed.
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