By Huw Jones and Andrew MacAskill
LONDON, Aug 23 (Reuters) – The UK’s financial sector is to propose to the government a “mutual access” trade pact between Britain and the European Union that would allow banks and other firms to continue doing cross-border business after Brexit, according to a draft report seen by Reuters.
Unless Britain negotiates new trading relations with the EU, banks, insurers and fund managers in Britain could be locked out of the bloc’s markets.
“The proposals in the report are intended to achieve a level of mutual access for EU and UK firms, which is as close as possible to the current levels of access that exist for such firms within the EU framework,” the report said.
The IRSG is sponsored by the City of London Corporation, home to London’s “Square Mile” financial district, and TheCityUK, Britain’s most powerful financial lobby.
The report sets out how a trade pact for financial services could be structured and policed by a new dispute resolution body with powers to sanction breaches.
Punishment could include withdrawal of mutual access rights, the payment of “compensation” in the form of offsetting trade benefits, or retaliatory steps, such as measures that affect an equivalent value of trade, the report said.
No such trade pact in financial services has been tried before.
“The IRSG is aware that there will be challenges associated with developing the EU/UK Agreement… and require the parties to reach agreement on a number of novel issues – in particular, with regard to allowing a firm from the other party to have access to their markets without having to obtain a local licence.”
The report said it may be “appropriate to have a lighter touch regime” for wholesale financial business between banks, but this would not be appropriate when retail customers are involved.
But recent EU proposals to supervise clearing houses in Britain after Brexit because they clear large amounts of euro denominated derivatives – or move the business to the EU – raises “potential complication”, the report said.
Britain and the EU could also create a “financial services forum” to encourage “continuing alignment” by sharing information, and participating in the development of new laws and regulations.