LONDON (Reuters) - A push by European Union countries to grab a slice of London’s financial sector ahead of Brexit could backfire by raising costs for consumers and companies on the continent, the UK’s main banking industry body said on Wednesday.
Frankfurt, Paris, Dublin and Luxembourg want to attract banks, insurers and asset managers in Britain who need an EU base by March 2019 to maintain links with European customers. France is also keen to take on some clearing of euro-denominated derivatives moving to the EU from London after Brexit.
“We detect some degree of political will in certain parts of continental Europe in order to reclaim what they perceive to be 20 years loss of wholesale financial services to the London market,” Stephen Jones, chief executive of UK Finance, told a House of Lords committee.
However, Jones said, fragmenting markets could bump up costs significantly for consumers and companies on the continent.
“It’s a very short sighted approach to negotiations, but I recognise that in certain markets it’s the political reality,” he said.
Jones and others urged MPs not to fight back by ditching some EU financial rules when they slot the bloc’s regulations into UK law in the Withdrawal Bill now before parliament.
Some MPs have said Brexit is an opportunity to scrap EU rules which they see as crimping London’s global competitiveness in finance.
Financial sector officials worry that too much divergence with EU rules would mean no market access to the bloc after Brexit.
Mark Hoban, chair of the International Regulatory Strategy Group, a think tank backed by the City of London and TheCityUK lobby, said financial firms want predictability and not a “bonfire of regulations”.
“My concern would be... that if this bill is used as an opportunity to unpick regulation, that would be to the detriment of that stability and certainty,” Hoban said.
“The key concern that we hear from the sector is for clarity, certainty and stability, and just knowing there aren’t going to be tweaks and changes,” added Catherine McGuinness, head of policy at the City of London.
Jones said Britain should wait until it has agreed new trading terms with the EU before changing any rules.
The financial sector has called on the government to quickly agree a “standstill” transition period, during which Britain complies with EU rules to minimise job moves to the bloc.
British Prime Minister Theresa May has said she expects to agree new trading terms by March 2019, which Jones said his members were taking with a “pinch of salt”.
Reporting by Huw Jones; Editing by Elaine Hardcastle