Britain’s finance minister Philip Hammond has urged for continued collaboration between the U.K. and European financial services businesses as Brexit talks enter into their second day.
In his annual Mansion House address, Hammond sought to reassure City of London leaders that U.K. businesses could continue to operate with the EU while it establishes its new relationship outside of the union.
Though backing Prime Minister Theresa May‘s plans for a hard Brexit, Hammond called for an “implementation period” that would remove the risk of a “cliff edge” departure, which could damage business.
The financial services sector should be central to this, he said, citing its “crucial” role in daily life. The U.K. is currently the EU’s biggest financial market.
“Let me be clear about this,” Hammond said Tuesday. “Fragmentation of financial services would result in poorer quality, higher priced products for everyone concerned.
Under EU passporting rules, all banks and financial services companies registered in the EU or European Economic Area (EEA) are free to trade with one another with little EU regulation. This is the foundation of the EU single market for financial services. However, this benefit will be at risk if the U.K. government pursues its goal of leaving the single market, prompting concern among businesses.
Hammond sought to allay fears by outlining a three-step plan to securing the industry. This involves establishing new regulatory guidelines for businesses; conducting risk management; and reassuring businesses that the new framework will be permanent.
“Avoiding fragmentation of financial services is a huge prize for the economies of Europe.”
“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.
“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’s comments on the financial services industry came amid wider calls for a transition period for all businesses.
“We’ll almost certainly need an implementation period, outside the (EU’s) customs union itself, but with current customs border arrangements remaining in place, until new long-term arrangements are up and running.”
Hammond was initially due to make his Mansion House address last Thursday but it was delayed in the wake of a fire at a tower block in west London.
Europe must avoid fragmentation of financial markets post-Brexit, urges UK’s Hammond