LONDON (Reuters) - Britain’s future access to the European Union financial market must take into account how far it will diverge from the bloc’s rules, a European Commission official said on Wednesday.
After leaving the EU in January, Britain retains full access to the bloc until the end of 2020 under a transition deal with its former partners, with both blaming each other for missing an end of June deadline for assessments on access from 2021.
Future access will depend on Brussels deciding that Britain’s financial rules are and likely to remain equivalent to or sufficiently aligned with those in the bloc.
“We need to have a forward-looking approach and have a good understanding of the intentions the UK has in terms of future financial regulation,” Andrea Beltramello told an online event organised by the Futures Industry Association, an industry body.
The London Stock Exchange’s London Clearing House clears more than 90% of euro-denominated interest rate swaps and said it needs certainty on EU access by September to avoid a “cliff-edge” that forces customers to move positions out of Britain by December, potentially undermining market stability.
Beltramello said Brussels would not wait until the last minute to make its intentions known, but that markets should prepare for all possible outcomes.
“We are very mindful of the situation and we will take the steps that are necessary to deal with financial stability risks,” Beltramello said.
Julien Jardelot, the LSE’s head of Europe government relations and regulator strategy, said he hopes the EU can give some form of legal clarity shortly.
“We are confident that both EU and UK regulators... understand the need to ensure a smooth transition,” Jardelot said.
The European Central Bank wants euro clearing moved from London to the euro zone, but Jardelot said there was “no discernible” movement to Eurex in Frankfurt because clients don’t want market fragmentation.
Reporting by Huw Jones; Editing by Alison Williams, Barbara Lewis and Alexander Smith