The UK’s departure from the European Union’s single market may not see an end to cross-border regulation, a government white paper has suggested.
The government today (2 February) published a policy document setting out its plans for leaving the European Union and working with the bloc afterwards.
In the white paper, the government stated it will aim for the “freest possible trade” in financial services in the deal between the UK and the European Union.
The 75-page document stated: “In highly integrated sectors such as financial services there will be a legitimate interest in mutual cooperation arrangements that recognise the interconnectedness of markets, as so clearly demonstrated by the financial crisis.
“Since that time, the European Union has taken a number of steps to strengthen collective oversight of the sector.
“As the UK leaves the EU, we will seek to establish strong cooperative oversight arrangements with the EU and will continue to support and implement international standards to continue to safely serve the UK, European and global economy.”
Over 75 per cent of the EU’s capital market business is conducted through the UK and Britain’s financial services industry manages £1.2trn of pension and other assets on behalf of European clients.
In order to gain access to the EU’s single market, the UK’s financial services industry is likely to have to demonstrate “equivalence”, the process by which the EU recognises a third country's legal and regulatory regime is correspondent to its own framework.
This has led some experts to claim it is unlikely that Brexit will lead to less EU regulation since the UK may have to introduce European rules to maintain equivalence.
Dennis Hall, managing director of London-based Yellowtail Financial Planning, said: "I didn't really expect regulation would change all that much, whichever kind of Brexit we aim for.
"I think the regulator is pretty happy with where we are and the more we can look like Europe, the more we can keep that market open."
Last night the government won a House of Commons vote to trigger Britain’s departure from the European Union.
damian.fantato@ft.com
