By Huw Jones
LONDON (Reuters) – Intense dialogue between British and European Union financial regulators must start now or London risks being cut off from the bloc after Brexit, a top banking lobbyist said on Wednesday.
Banks, insurers and asset managers in Britain currently have unfettered access to customers across the EU but this will end after Britain leaves the bloc.
Future EU access for UK financial firms will almost certainly be based on “equivalence”, whereby Brussels deems that a foreign firm’s home rules are aligned enough with those in the bloc to protect financial stability and customers.
Simon Lewis, who stands down as chief executive of the Association for Financial Markets in Europe (AFME) this month after a nine-year stint, said that for equivalence work, good regulatory links were needed.
“You need to have structures in place like the EU-U.S. dialogue, and they probably need to go beyond that,” he said.
“They need to get on with that. That work hasn’t started. The sooner we can have that discussion about how equivalence is going to work and be adapted, the better.”
EU and UK markets watchdogs are, however, at loggerheads over whether swathes of trading in euro-denominated shares can continue in London if there is a no-deal Brexit.
There is also tension over how much EU regulators should be allowed to regulate UK clearing houses with EU customers.
Close regulatory dialogue would help clear up “misunderstandings” and avoid equivalence decisions “going the wrong way”, Lewis said.
While few jobs or activities have moved so far from London to new EU hubs, it was “early days”.
“Banks are looking at how they can minimise the cost of moves by where possible local hires or deferring decisions,” he said.
Much could hinge on what asset managers in London do, with many having opened hubs in Dublin and Luxembourg.
“If over time the asset managers physically move from London, then that will make quite a difference.
“It’s a golden rule of any business that you should be close to your customers. That again is not entirely clear how that is going to play out,” Lewis said.
Banks also need to rebuild public trust shattered by taxpayer bailouts during the financial crisis a decade ago.
“The industry has been seen to have overlobbied on certain issues and there was a degree of distrust about that,” Lewis said.
“There was a feeling that the industry was taking it for granted that its voice would always be heard. The rebuilding of trust in the industry will take quite a long time.”
(Reporting by Huw Jones; Editing by Mark Potter)