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Bank of England's Bailey slams EU barrier to investment banking services after Brexit

FILE PHOTO: Bank of England Governor Andrew Bailey poses for a photograph on the first day of his new role at the Central Bank in London, Britain March 16, 2020. Tolga Akmen/Pool via REUTERS

LONDON (Reuters) - An EU refusal to grant cross-border access to investment banking services from the CIty of London shows how the bloc wants to force Britain to keep adopting its rules in future, Bank of England Governor Andrew Bailey said on Wednesday.

Brussels has said that for now it won’t allow investment banks to service customers in European Union member states directly from London after Britain’s unfettered access to the bloc ends on Dec. 31, forcing the banks to use their EU hubs instead. The EU said it wants to review the rules first.

The EU is set to decide in coming weeks on how much direct access it will grant all types of UK financial activity under its system that checks whether British rules are “equivalent” or as robust as those in the 27-nation bloc.

Bailey told parliament’s Treasury Select Committee it was “interesting” that the largest amount of value in equivalence-based cross-border activity with the EU would be in investment services.

“I just do not see how we can have an equivalence process that essentially says, the EU says, we are not going to even judge equivalence because our rules are going to change,” he said.

“It means really they think this is a rule-taking process... I don’t think that is equivalence. I am very concerned that that is how they think equivalence works. We haven’t made any progress in this space for the moment,” Bailey said.

Alex Brazier, the BoE’s executive director for financial stability, said the EU decision showed the danger of having equivalence that can be withdrawn at any minute, making it difficult to have “well tailored” rules for the City of London.

Of the 300 billion pounds in financial services business in Britain, about 30 billion pounds came from EU clients, with a third of that now in play under equivalence, Brazier said.

“I am still a strong supporter of equivalence, it means we have open markets, that would be better all round,” Bailey said.

Reporting by Huw Jones, editing by Mark Heinrich

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