UK-EU deal preserves Britain's leeway on market regulations

BRUSSELS (Reuters) - European Union leaders reached a deal late on Friday that offers leeway to Britain in applying banking and markets’ regulations, but maintains that there will be a single set of rules for the financial sector within the EU.

A cyclist rides through Richmond Park, with the City of London financial district seen behind in London, Britain February 19, 2016. REUTERS/Toby Melville

EU Council President Donald Tusk said the agreement aimed at keeping Britain in the bloc won unanimous support from all 28 EU leaders.

In a two-day summit meant to set new terms for Britain’s EU membership, France pushed to reduce the leeway offered to the City of London, on the grounds that it could have given an unfair advantage to the British financial centre, which generates around 10 percent of Britain’s gross domestic product.

The final deal preserves most of the concessions made to Britain in previous versions of the settlement, although it may not address concerns raised by British regulators and analysts.

The text confirms that British regulators, such as the Bank of England in London, are to be responsible for the supervision of national banks and markets when it comes to preserving financial stability.

Attempts to exclude markets from the scope of the leeway were rejected during the negotiations.

However, these sovereign powers can be exercised only “without prejudice to the development of the single rulebook” of EU financial rules, the final deal maintains.

“The text clarifies that financial oversight is a national competence but without prejudice to the single rulebook and to European financial authorities,” said Roberto Gualtieri, head of the economic and monetary affairs committee of the European Parliament.

France had also pushed for deleting wording in the text that may have been interpreted as freezing the powers of EU financial authorities at their current levels, limiting their clout on British financial operators.

Paris wanted to cancel the word “existing” in the sentence of the text saying that regulatory leeway offered to Britain is “without prejudice ... to the existing powers of the Union institutions and relevant Union bodies.” While the compromise keeps the word “existing,” it deletes “institutions and relevant Union bodies” from the text.

“The possibility to give new powers to EU financial institutions is therefore preserved,” an EU negotiator said.

Reporting by Francesco Guarascio, Paul Taylor; editing by Andrew Heavens and G Crosse