British banks may face more EU hurdles post-Brexit

BRUSSELS • France is proposing a rule change that would make life a lot harder for British banks after Brexit.

The nation is seeking to tighten the equivalence rules of the MiFID II regulations, which would help British finance firms do business in the European Union after Britain leaves the bloc, according to an internal policy document circulated in Brussels and seen by Bloomberg.

As they stand, the rules allow companies from non-EU nations access to internal markets so long as their regulatory regime is deemed "equivalent" to the EU's. France calls this approach "inadequate" and says it fails to ensure that firms in countries outside the EU are not treated more favourably than those within it, according to the document dated May 14.

A spokesman for France's representation to the EU did not respond to requests for comment.

France's bid to toughen equivalence comes as British banks and finance companies brace themselves for life without the passporting rules that allow them to sell services in any EU member state.

Europe's revised Markets in Financial Instruments Directive, which came into force at the start of this year, could provide a possible workaround for some firms.

The EU has already started to overhaul the regime's equivalence rules for investment services, which remain untested and were not designed with Brexit in mind.

France's bid to toughen equivalence comes as British banks and finance companies brace themselves for life without the passporting rules that allow them to sell services in any EU member state.

France is seen as taking the toughest line in the talks and has even been accused of seeking to lure jobs away from the City of London.

In its policy document, France says finance firms should have to set up a branch inside the bloc before they are allowed to serve clients there. Its proposals will be discussed with other member states, some of which, like Luxembourg, have taken a friendlier stance towards Britain.

"Preventing EU customers from dealing with UK businesses without an EU branch would seem to reduce choice and competition," Ms Rachel Kent, a partner at law firm Hogan Lovells in London, said in an e-mail. "How is that in the best interests of consumers?"

Once EU nations have settled on a common position, they will have to work out a final agreement with the European Parliament.

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A version of this article appeared in the print edition of The Straits Times on June 07, 2018, with the headline 'British banks may face more EU hurdles post-Brexit'. Print Edition | Subscribe