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LONDON, June 20 (Reuters) - A new system is needed for allowing British and European Union banks to do business with each other after Brexit to avoid splitting markets, Britain's finance minister Philip Hammond said on Tuesday.
Britain, the EU's biggest financial market is leaving the bloc in 2019, raising the prospect of an abrupt cut in cross-border links without a new trade deal.
"Fragmentation of financial services would result in poorer quality, higher priced products for everyone concerned," Hammond told a financial audience in London.
At present, banks and insurers in London serve the EU market from a single base, but this "passporting" is set to end after Brexit without new arrangements.
"First, we will need a new process for establishing regulatory requirements for cross-border business between the UK and EU. It must be evidence-based, symmetrical, and transparent. And it must reflect international standards," Hammond said.
"Second, cooperation arrangements must be reciprocal, reliable, and prioritise financial stability. Crucially they must enable timely and coordinated risk management on both sides."
"Third, these arrangements must be permanent and reliable for the businesses regulated under these regimes," Hammond said.
Reporting by Huw Jones; Editing by Alison Williams