UK should be ‘concerned’ over EU power to revoke City access, watchdog warns

Britain is right to push for a permanent access deal for the City in Brexit talks to calm fears over Europe’s power to revoke agreements with as little as 30 days’ notice, financial regulators have warned.

Sam Woods, deputy governor of the Bank of England and chief executive of the Prudential Regulation Authority, told a House of Lords committee that the UK “should be concerned” about Europe’s power to scrap so-called equivalence status.

It comes after Chancellor Sajid Javid revealed plans earlier this week to demand a “permanent equivalence” in EU negotiations, calling for a long-lasting agreement on market access to financial firms from non-EU member states.

Governor of the Bank of England
Governor of the Bank of England

There have been increasing concerns among City firms, compounded by a recent equivalence row in Switzerland, that the EU could revoke agreements at short notice, sometimes for political reasons, putting their ability to service European clients at risk.

Incoming Bank of England boss Andrew Bailey, who currently heads up the Financial Conduct Authority (FCA), told the committee there were “painful lessons” to be learned from the dispute between Switzerland and Europe, which saw the country lose its equivalence and retaliate by barring the trading of Swiss-listed company shares on EU platforms.

On the EU’s power to scrap equivalence due to political reasons, Mr Woods said: “It’s something we should be concerned about, because plainly I think it could occur.”

“If it can be withdrawn with 30 days’ notice, firms are going to be quite reluctant to put much weight on it.”

He added that phase-out agreements may help give firms greater confidence in the equivalence regime, if they knew they would have time to make alternative arrangements even if it was withdrawn.

On Mr Javid’s plans for permanent equivalence, he said: “I do hope it will be possible to achieve something more durable, but whether this is possible to agree, it’s hard to say.”

However, the EU’s chief negotiator, Michel Barnier, has already poured cold water on UK aims for a long-lasting equivalence deal, telling MEPs in Strasbourg on Tuesday that Britons should “not kid themselves”.