LONDON (Reuters) - Britain will reject “protectionist” agendas from the European Union in favor of “forward-leaning” proposals when it comes to supervising cross-border financial markets after Brexit, UK finance minister Philip Hammond said on Wednesday.
Britain, the bloc’s biggest financial center, acknowledged there are legitimate concerns among its European partners about the oversight and supervision of financial markets after the UK leaves the EU in March 2019, Hammond said.
“We will address them by making forward-leaning proposals for greater transparency, cooperation, and agreed standards based on international norms,” he told the first annual dinner of UK Finance, a new industry body launched this year.
“But, let me be clear, we will not accept protectionist agendas, disguised as arguments about financial stability,” Hammond said in his speech at the Mansion House in London’s “Square Mile” financial district.
Brussels has proposed that important foreign clearing houses that handle large amounts of euro denominated trades will require joint supervision by EU and UK authorities to ensure euro zone financial stability. Clearing houses or central counterparties (CCPs) stand between two sides of a trade to ensure its completion, even if one side goes bust and most euro clearing in Europe is done inLondon by LCH, part of the London Stock Exchange (LSE.L).
But if joint supervision was deemed by Brussels to be not working well, euro clearing for EU based customers would have to move to the bloc, a step Britain fiercely opposes as it would undermine the City as a global financial center. “It is my priority as Chancellor to ensure that the UK remains the financial services center of the world. And the global hub for fintech,” Hammond said.
“We have the time zone, the language, the legal system, the talent, the capital markets, and the tech center to succeed.”
Nevertheless, banks, asset managers and insurers based in London are already announcing plans to open up new hubs in the EU by 2019 to maintain guaranteed links with European customers after Brexit.
UK Finance Chief Executive Stephen Jones said Brexit will have “profound ramifications” for retail and commercial banking both in Britain and the EU.
But he was optimistic that the case for a transition period between leaving the bloc and start of new trading terms is “well understood” by government - a step bankers say will slow but not halt their plans for EU hubs.
“We need to secure a renewed mandate for the UK to continue as one of the leading global financial centers,” Jones said.
“Government, regulators, and our member firms need to work together to maintain the UK as the strongest financial center in Europe and within Europe’s individual markets.”
Core to this was maintaining strong regulation, he said, in a rebuff to some pro-Brexit lawmakers who see leaving the bloc as an opportunity to shed some of the EU’s strict financial rules.
“We do not desire or need a bonfire of regulations - a frequent concern of our European partners that we must allay,” Jones said.
UK Finance is advising the government on developing proposals for a cross-border financial services deal whereby the UK and EU would mutually accept each other’s rules.
Britain must not revert to an “insular and defensive mentality” by forcing EU banks to re-apply for authorization to operate in the UK unless the UK was prepared to accept the same treatment for British firms in Europe, Jones said.
The UK financial sector also needed to regain trust of its customers and “own” its mistakes, Jones said, speaking on the 10-year anniversary of the start of the 2007-09 financial crisis that forced British taxpayers to bail out lenders.
The most troubling statistic in British banking is that only 13 percent of small companies trust their bank to act in their best interests, Jones said.
Reporting by Huw Jones; Editing by Toby Chopra