January 31, 2018 / 9:16 AM / 8 months ago

EU sharpens line against post-Brexit bank passports

BRUSSELS, Jan 31 (Reuters) - European Union negotiators see no room for discussion with Britain on maintaining its “passport” access to EU financial markets after Brexit but are willing to look at free trade in the sector, diplomats said.

Speaking after EU officials briefed representatives of the other 27 member states on Tuesday, several diplomats who were present told Reuters that there appeared to be some differences among governments over how far they were willing to give banks and other financial firms from London access to EU customers.

But, said one: “On financial services, it is nowhere close to the access one gets as a member state or through the EEA (European Economic Area). There will be no passporting rights.”

Michel Barnier, the EU’s Brexit negotiator, has already made clear in public that Brussels will reject suggestions from the City of London that institutions maintain those “passports”, which allow them to offer services across the 28-nation bloc.

He has, however, said that some British regulations could be treated as “equivalent” to the EU supervisory regime, giving some favourable access.

At Tuesday’s meeting, part of a series of “seminars” by the negotiating team with national envoys as the EU prepares for a start of talks in April on a post-Brexit relationship, indicated a broad consensus behind that view, several diplomats said.

Because Britain was leaving the EU’s Single Market and rejecting its rules, including arbitration by the EU court, one said: “It’s clear that they will lose passporting rights as this is part of the internal market and our regulatory regime.

“When they do that, the only other alternative is what we have in some of our FTAs,” the person added, referring to free trade agreements the EU has with other countries.

And while Barnier has said that free trade accords have in the past offered only very limited access for financial services providers, he has said there was a willingness to look at the possibilities of “equivalence”.

Some envoys expressed caution about how far that could be done, while others were more open to closer cooperation.

“Equivalence” would be granted “case by case” to certain types of activity, the diplomats were told.

“It will, at best, be much less, and only specifically justified per sector. That’s the rub,” one of them said. Some areas of business would not be able to get such a deal.

“The key message was that given the UK’s red lines,” another diplomat said, “A free trade agreement is the only possible cooperation scheme.” (Writing by Alastair Macdonald; Editing by Peter Graff)

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