LONDON (Reuters) – A disputed blueprint for financial services trade with the European Union after Brexit is finding favour with Britain’s government, the financial lawyer who wrote the proposal said on Wednesday.
Chancellor of the Exchequer Philip Hammond outlined last week the trading terms in financial services he wants from the EU after Britain leaves the bloc next March.
Barney Reynolds, a partner at Shearman & Sterling lawfirm, said those terms mirror his own blueprint for “enhanced equivalence”, which envisages a bilateral agreement between the EU and Britain with safeguards.
“Hammond’s speech last week essentially set out at a skeletal level an enhanced equivalence proposition for financial services which basically mirrors what’s in here,” said Reynolds, brandishing a copy of his plan at an event in Britain’s parliament.
Equivalence is a legal mechanism that allows countries from outside the EU to access its single market in limited circumstances, but access is patchy and can be revoked at short notice. In his speech Hammond said “a more robust and enduring” form of equivalence could work for both sides.
Financial sector leaders have been united in backing a rival “mutual recognition” trade plan sponsored by the City of London financial district and TheCityUK, the body that promotes Britain as a financial centre.
They have dismissed Reynolds’ blueprint as being unworkable and their refrain has been “There is no Plan B”.
But Reynolds said his blueprint was more practical as it builds on the existing EU system of granting financial market access. “We are not creating anything new,” he added.
French finance minister Bruno le Maire said last week that the basic EU equivalence regime was the best Britain could expect, and EU officials have told bankers that a mutual recognition plan won’t fly.
Mutual recognition introduces “slippery concepts” into financial services trade, such as how to manage divergence in British and EU banking rules, Reynolds said.
“I get to the same place using existing EU architecture,” Reynolds said.Ahead of Brexit, banks, insurers and asset managers based in Britain are taking no chances and are setting up hubs in the EU to ensure continued access to customers, irrespective of future trading terms.
John Baron, a pro-Brexit member of parliament for the governing Conservative Party, said Reynolds’ enhanced equivalence blueprint would benefit Britain and the EU.
He warned the EU of the consequences of trying to cut off London from Europe by playing a “zero sum game”.
“Britain would produce a slimmer rule book… and become much more competitive,” Baron told the event in parliament.
Reporting by Huw Jones; Editing by Gareth Jones