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14


EVENTS Fear and equivalence in Lost London


Delegates gathered in the Square Mile for City Week 2018, and hopes that Brexit might be off the agenda were swiftly scrapped. IBS Journal found its way into the ring-side seats for a bruising day of policy discussion


Senior Fintech Reporter Alex Hamilton


O


ne and only one topic dominated discussion at City Week 2018. Now in its eighth year, delegates from across the banking sector and financial services industry piled into the


Guildhall in London. Beneath the storied stones of a hall decorated with statues of Nelson, Pitt and Churchill, the Brexit question once again was all anyone could talk about.


Valdis Dombrovskis, a Latvian politician and the current European Commission vice president for the Euro and social dialogue, stole all the headlines. He told delegates that a bespoke deal between the City of London and Brussels, allowing uninterrupted access to the EU for the corporation’s businesses, would be unlikely. Dombrovskis said that, in his opinion, Britain should use equivalence rules roundly rejected by the UK government so far in negotiations. Under equivalence rules, the EU could potentially give the UK just 30 days’ notice before pulling the plug on the agreement.


“Equivalence is not perfect, neither for firms nor for supervisors. But one should not make the perfect be the enemy of the good,” he said. “Equivalence has proven to be a pragmatic solution which works in many different circumstances, and it can be made to work for the UK as well.” Fifteen countries have an equivalence deal on central counterparties.


Dombrovskis stated that the UK can expect a worse deal than any of those 15 countries. Brussels would be keen to keep as much EU control over London’s business as possible, considering the city is the largest and most important in the 28-state union.


“Equivalence is only possible if there is close convergence of rules and supervision. If the EU and a third country should go different ways, the conditions for convergence will fall. This means the terms of equivalence may be changed or, as a last resort, withdrawn,” he added.


The news will have fallen on unwilling ears. Catherine McGuinness, during a separate session, stated that equivalence “simply won’t cut the mustard”. She added that the system would be unable to give firms the assurance that they could continue doing business as usual.


The current system, she added, excludes “vital elements” of the sector, including deposit taking, mortgage lending and payments.


Jorg Gasser, state secretary for international finance in the Federal Department for Finance in the Swiss government, offered a view from the middle of the alps. “Equivalence procedure is, at the end of the day, always political,” he said. “We have been declared twice already equivalent for a certain area of market access in the past, but we did still not get the green light from the European Commission.”


An example Gasser offers is the equivalence of the Swiss stock exchange, which has only been declared equivalent until the end of 2018. It has access to the EU which could be revoked at short notice. There are fears that talks over an extension will only be held at the tail end of the year, at a time when uncertainty could cause damage to clients.


“The problem is that technically we are equivalent – nobody contests that because it is the status quo. It is just a question of continuing this access. But equivalence is most of all political, and that makes it difficult.”


Difficult? Brexit? Surely not!


www.ibsintelligence.com | © IBS Intelligence 2018


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