Amid coronavirus pandemic, the Association for Financial Markets in Europe (AFME), has released a statement on July 6, 2020, urging Britain and the European Union (EU or bloc) to come to an agreement and make progress on the EU financial market access. AFME cautioned that due to the COVID-19 pandemic, financial markets would find it harder to cope with potential disruption to Brexit planning.
In the timeline of events, Britain left the EU in January 2020 with its large financial services sector losing privileged access to EU customers from January 2021. On February 11, 2020, Britain’s finance minister Sajid Javid requested the EU to ensure Britain’s financial markets comply with the EU’s “equivalent” regulatory standards. After the split, Britain has continued full access for financial firms under the bloc’s rule until the end of 2020.
Last year, Britain and the EU set a deadline of June 2020 to make assessments on financial market access from January 2021. The purpose of the assessments was to allow businesses to continue as usual into next year. Brussels has confirmed that once equivalence is granted for financial activities, it would supervise if Britain’s regulations are meeting with the bloc’s standards.
Though Brussels acknowledged that Britain’s regulations are as robust as the EU’s, the deadline for assessing future cross-border trade in financial services was somehow missed.
Without equivalence, financial firms in Britain would have cut off from the EU market and the EU investors would lose access to financial services in Britain. Consequently, Britain’s financial firms have opened hubs in the bloc to serve their customers.
As suggestive measures to avoid potential disruptions, AFME has asked the EU to ensure its investors can continue using clearing houses in Britain before the end of September 2020. Additionally, two-way access in-stock and derivatives trading could also be granted to avoid disruption.
AFME also recommended drafting a formal framework for Britain and the EU regulators to grant financial market access. AFME’s statement becomes quite crucial, considering the legislative agenda of Britain and the EU for financial services.
In a major development, the EU’s chief Brexit negotiator Michel Barnier said that the bloc would grant equivalences to financial firms in January 2021 only in the areas of interest of the EU, its investors, and its customers.