LONDON, Sept 20 (IFR) - Almost 13,500 banks, insurers, asset managers and other financial firms are using “passporting” to allow easy access between Britain and the rest of the European Union, underscoring the importance of the issue in Britain’s exit negotiations with the EU.
Andrew Bailey, chief executive of Britain’s Financial Conduct Authority, said in a letter published on Tuesday that 13,484 firms were using the passporting arrangements and 359,953 passports had been issued.
More firms in Europe were using passporting than UK-based firms but the data show heavy skewing towards London as a financial centre.
There were 8,008 firms using “inbound” passporting (issued by the other 27 EU states to allow them to do business in Britain or elsewhere), and 5,476 were using “outbound” passporting (issued by a UK authority to a UK firm to give it access to the rest of the EU), according to the data in the letter.
The data showed there were 336,421 “outbound” passports awarded to UK firms. That far exceeded the 23,532 of “inbound” passports in the FCA data.
That is partly because major firms typically require multiple passports, so a UK firm conducting one type of activity in 27 other countries would require 27 passports. The inbound data only include firms passporting into Britain from another EU or EEA state.
The data were requested and released by Britain’s Treasury Select Committee, which is assessing the impact of Britain’s vote to leave the EU on the financial services industry.
“These figures give us an initial idea of the effects of losing full access to the single market in financial services. The business put at risk could be significant,” said Andrew Tyrie, chairman of the Treasury Committee.
Financial passporting allows firms that are authorised in one EU country to provide services across the 28 EU states. It is a key reason why London has become such an important financial hub, as many firms use it as a gateway to Europe.
Banks and financial firms are worried Britain will not be able to agree arrangements that are equivalent to the current system. That could see international banks scale back in London, but also hurt European firms’ access to capital markets.
“None of the current off-the-shelf arrangements can preserve existing passporting arrangements, while giving the UK the influence and control it needs over financial services regulation as it develops,” Tyrie said, urging UK negotiators to make it a priority in Brexit negotiations.
“Efforts to secure an appropriate arrangement for UK-based firms will be one of the most challenging aspects of the negotiations about the UK’s future relationship with the EU.”
Passporting procedures differ depending on what kind of passport is requested. The types of business that may be passported are set out in the markets in financial instruments directive (MiFID) and the capital markets directive (CRD). One activity may require several different passports, meaning firms will often have more than one passport.