By Huw Jones
LONDON (Reuters) -The European Union’s executive body said on Wednesday it has formally adopted a draft memorandum of understanding (MoU) to allow financial regulators from Britain and the bloc to cooperate more closely, though stopping short of market access.
Britain’s EU exit largely severed its financial sector’s previously unfettered access to the bloc, raising concerns over London’s role as a global financial centre.
As part of Brexit terms, the EU agreed to formalise cooperation between financial watchdogs. However, that was put on hold Brussels following disagreements between the bloc and Britain over Northern Ireland, now resolved through the Windsor Framework.
The European Commission said on Wednesday is has adopted the draft MoU, though it still needs final political endorsement from EU states.
“I am confident that our relationship and future engagement in financial services will be built on a shared commitment to preserve financial stability, market integrity, and the protection of consumers and investors,” Mairead McGuinness, the EU’s financial services commissioner, said in a statement.
The MoU will create a joint EU-UK Financial Regulatory Forum, similar to one the EU already has with the United States.
“The MoU does not deal with the access of UK-based firms to the Single Market – or EU firms’ access to the UK market – nor does it prejudge the adoption of equivalence decisions,” the Commission said.
Joanna Penn, treasury minister in the UK parliament’s upper house, welcomed the “positive move” given how EU and UK financial markets are deeply interconnected.
“The Treasury stands ready to sign the MoU and we do look forward to operationalising the forum as soon as possible this year,” Penn told a debate on EU-UK financial services.
Treasury ministers will meet with McGuinness next week, Penn added.
The EU has granted ‘equivalence’ or EU market access to derivatives clearing houses in London until the end of June 2025.
In the meantime, the bloc has proposed a draft law to force banks and asset managers in the EU to shift a yet-to-be-decided chunk of their clearing home from London, though industry officials expect equivalence to be extended in some form after June 2025.
(Reporting by Huw Jones; Editing by Paul Simao, Kirsten Donovan)
