There may be yet some good news for UK based financial services in the wake of Brexit, if the Economic and Monetary Affairs Committee (Econ), a powerful committee within the EU Parliament, gets a draft resolution now being considered through to a plenary vote in its current form.
The resolution, prepared by the Secretariat of Econ, has been seen by Euromoney but may not yet have been seen by many members of the committee. It calls for any deal with the UK to include “fair arrangements regarding mutual access” to markets for financial services firms and notes that “a badly designed final deal would damage both the UK and the other 27 EU Member States”.
The authors also stress the importance of the UK as a “leading provider of financial services to the EU market,” and request that the European Commission assess the impact of Brexit on the Capital Markets Union project. It notes that Brexit could damage both the UK and EU economies.
The draft says that such consequences “… might affect the ability of Member States to deliver on their commitments in the Stability and Growth Pact;” and “calls on the Commission to clarify whether the effects of UK withdrawal could be considered as ‘exceptional circumstances’ under the current economic governance framework.”
The authors note the “considerable interdependence between the UK and the EU economy and financial systems”. The UK accounts for 40% of Europe’s assets under management, the motion states, and 60% of the EU’s capital markets business.
“UK-based banks provide more than £1.1 trillion of loans to the other EU Member States,” the authors add.
According to a person speaking with Euromoney, the draft will be considered by the entire committee between the date the UK triggers Article 50 and when the European Council adopts any mandate to negotiate with the UK. The date of both events is still uncertain, but there is likely to be little time between them, so committee members will have to make any changes to the draft quickly before adopting it. If adopted, the motion would go to a plenary vote.
All member states must vote in favour of any final agreement struck with the UK — even a single hold out could leave the UK without any formal agreement after the two-year expiry of Article 50.
But in a parliament that has largely vocalised a desire to take a tough stance with the UK, this draft represents a welcome softening in sentiment, particularly for its financial services sector.
The draft consists of 19 points, including the demand that “‘cliff-effects be avoided so far as possible in order not to cause disruption to the functioning of the financial services sector.”
The document also calls for cooperation between European Supervisory Authorities and national competent authorities with the UK’s regulators, and for a “swift proposal” on the future headquarters of the European Banking Authority, which is now based in London.
And it requests that competition policy arrangements be made to “ensure a level-playing field for companies operating in the EU27 and the UK” that could “take the form of an agreement along the lines of existing international agreements.”
In what appears to be an acknowledgement of UK Chancellor of the Exchequer Philip Hammond’s suggestion that UK may have to adopt a more lax tax policy if a suitable agreement can’t be reached, the authors also stress that “aggressive tax competition has to be avoided also after the UK withdrawal” and call on the UK “to commit to a the anti-evasion efforts and to the fight against tax havens after the withdrawal from the EU”.