London could “make the nightmare of the EU come true”, as the City said to break the bloc | UK

Dominic Raab rejects EU threat to City of London

In January, Amsterdam surpassed London as the largest equity trading center in Europe. An average of € 9.2bn (£ 8.07bn) of shares per day were traded on Euronext Amsterdam and the Dutch branches of CBOE Europe and Turquoise in January, a more than fourfold increase since December. The spike came as volumes in London fell sharply to € 8.6bn (£ 7.5bn), knocking the UK out of its historic position as the main European market hub, according to data from CBOE Europe.

The change is a direct consequence of the ban on EU financial institutions from operating in London because Brussels has not recognized that UK exchanges and trading venues have the same supervisory status as its own.

Without the so-called equivalency to facilitate cross-border transactions, there was an immediate shift of € 6.5bn (£ 5.7bn) of deals to the EU when the Brexit transition period came to an end on January 1.

In a recent report, economist Catherine McBride argued that while many outside of the financial services industry may assume that regulatory equivalence means “the same in substance or quantity,” it is now becoming obvious that for Brussels “equivalence” is simply a matter of political expediency. .

He explained: ‘At present, the UK not only has financial regulations the same, but identical to those of the European Union. The Commission states that equivalence has been withheld because the UK could change its regulations in the future.

“However, the Commission could withdraw the equivalence only 30 days in advance, so this is not a rational excuse.”

“In reality, the Commission has refused to grant UK-based trading platforms the equivalence to trade EU shares denominated in euros with the aim of forcing companies to relocate from London.

London could ‘make the EU’s nightmare come true’ as the City told it to break the bloc (Image: GETTY)

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Amsterdam (Image: GETTY)

“This is a mockery of the EU’s claims on a level playing field and appears to violate the most-favored-nation rules of the World Trade Organization (WTO).”

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The most-favored nation (MFN) principle is a cornerstone of the multilateral trading system conceived after World War II.

It seeks to replace the frictions and distortions of power-based (bilateral) policies with the guarantees of a rules-based framework where commercial rights do not depend on the economic or political influence of individual participants.

On the contrary, the best access conditions granted to one country should be automatically extended to all other participants in the system.

This allows everyone to benefit, without an additional negotiation effort, from concessions that may have been agreed between large trading partners with a lot of negotiating influence.

McBride noted that the reason Amsterdam attracted global attention in January is “probably due to a public relations exercise” to try to scare British politicians into signing the equivalency at any cost, given that the UK refused to do it in recent trade talks.

She wrote: ‘The EU wants the UK to agree to reflect EU regulations indefinitely, even when those regulations are not tailored to the UK’s massive financial markets and, in some cases, appear to have been specifically designed to hinder it.

‘However, the reason why London has been a hub for international investment for so long is precisely the reason why the UK must leave the regulatory domain of the EU. There is already a divergence from EU rules: the UK must become a nimble regulator to ensure that new products are brought to market in the City ‘.

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London could 'make the EU nightmare come true' as the City told it to break with the bloc

City of London (Image: GETTY)

Financial services, argued the economist, are not static: entire industrial sectors have developed in the last 30 years: hedge funds, OTC derivatives, fintech, carbon trading, etc.

Investment strategies or hedging positions that are popular now will not necessarily be so next year, or even next month.

He concluded in his article for Briefings for Britain: “The City of London has maintained its leadership position for so long because it is innovative, adaptable and flexible.

‘Or it used to be before the EU strangled it with regulatory commitments.

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«The city needs to rediscover its innovative spirit. Just as he invented the Eurodollar market in the 1970s, perhaps now is the time to develop an offshore euro market. The EU, and the French in particular, have made no secret of their desire to smother the UK in red tape to prevent it from becoming ‘Singapore-en-Thames’.

“Simple business logic suggests that the best way to build a successful future is to make the EU’s nightmare a reality.”

Despite admitting that the trade deal reached with the EU on Christmas Eve did not fulfill his ambitions on financial services, Prime Minister Boris Johnson has always dismissed warnings that European financial centers could rob him of the supremacy of the City of London.

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Prime Minister Boris Johnson (Image: GETTY)

London could 'make the EU nightmare come true' as the City told it to break with the bloc

Chancellor of the Exchequer Rishi Sunak (Image: GETTY)

In 2018, Johnson praised London’s financial sector during a speech at the UK-Africa Investment Summit when he attacked German Chancellor Angela Merkel.

The prime minister said: ‘One tube stop and you are in Canary Wharf where, together with his older brothers in the city, billions of pounds in capital will be raised for every company you can imagine, from French to African construction. telecommunications to American drugs to cure cancer.

‘It may give you an idea of ​​the scale of financial services in London when I say that Canary Wharf is a bigger banking center than all of Frankfurt.

“We have technology, technology of all kinds, and we have by far the largest technology sector in this hemisphere.”

Last month, Chancellor of the Exchequer Rishi Sunak praised the potential for a “Big Bang 2.0” in the city of London after Brexit, as he hinted that the government is willing to cut red tape.

The chancellor raised the possibility of a Margaret Thatcher-style raise for City.

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He stressed that while equivalency and other elements were important, his primary focus would be to ensure that the Square Mile “remains the most dynamic place to provide financial services anywhere in the world.”

Brexit: The City of London Backed to Thrive by Daniel Hodson

In an interview with City AM, Sunak said that “there are many things in the deal that are good for financial services.”

He cited the free flow of data, business trips and agreements on legal and professional services, as well as suggesting that an agreement on regulation will be reached soon.

Mr. Sunak told the publication: “There is strong language on future regulatory cooperation and the launch of a Memorandum of Understanding in a reasonably short time frame to have that structured regulatory dialogue.

“And there is also a forum for future equivalency decisions. That is positive.

“But regardless of all that, I think it’s important that we move on and ensure that the City of London remains the most dynamic place to provide financial services anywhere in the world.”

Referring to Brexit enthusiasts who claim the City can now enjoy another ’90s-style jump, Sunak said they “make a very, very good point,” adding that people were free to “call it Big Bang 2.0 or whatever”.

He added: “If you look at the history of the city that goes back even further, it has always constantly innovated, adapted and evolved to changing circumstances and as a result it has thrived and prospered. And I think it will continue to do so. «

Mr. Sunak said that the Treasury “will play a role in that, and all the companies and people involved will help us do that.”

However, the Chancellor also downplayed the need for fundamental change in the City, pointing to its natural advantages and the “culture and creativity of our people.”

He noted: “Regulation is important, of course, as is the time zone, as is the language. All those things are important.

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