Uncertainty reigns as reports on Post Brexit passporting contradict one another
Two EU reports on passporting released in quick succession display radically different expectations of the Post-Brexit passporting environment. The latest report from Brussels suggests London may not see the ‘enhanced equivalence’ it expects from the Brexit deal.
An earlier leaked EU report implied that UK-based financial services would most likely retain their access. The uncertainty of restricting access for a state that currently holds 40% of Europe’s AUM would be unprecedented, and the document asserts that a ‘workable agreement’ for both the UK and the countries remaining in the EU would be in everyone’s best interest.
However, a report published more recently suggests Brussels stance on equivalence may be hardening. Across the European Commission, the consensus view is that it would be destabilising to have a country gaining or retaining equivalence whilst simultaneously backing down on regulatory reporting requirements.
It comes as no surprise to see that experts do not concur on the impact of Brexit. While some have predicted a move towards a Singapore or Hong-Kong-style approach to regulation post-Brexit, others felt that the world’s fifth largest economy has little choice but to retain current regulation and the passporting rights that accompany it.
Equivalence is becoming a much-discussed topic since February’s presidential inauguration. With the new President’s manifesto calling for a reduction or even all-out repeal of Dodd-Frank regulations, it’s unclear how much of the post-GFC regulatory culture will continue in its current state.
Following this report, the Financial Times’ recent poll shows a reduced confidence in London’s position post-Brexit; more industry professionals are predicting that New York will top the tables as the global financial hub by 2022. There is likely to be great uncertainty in the run-up to Article 50’s trigger in April as interested parties both within and outside of the EU seek for a positive resolution.