Rishi Sunak stated that after negotiations with the European Union, the UK is “moving forward” on its own city rules-Business Reality | Business

Failed to (yet) agree to one UK-EU Financial Services Mutual Agreement Will disappoint the city, although it certainly won’t be shocking—When Europe urges companies to move more trade and high-level transaction makers to EU locations.

The crux of the problem is that when the Brexit transition period ends at the end of 2020, the British financial services company loses its passport rights. extremely Valuable to the city.

It allows companies authorized in one EU or EEA member state to trade freely in another country without further scrutiny-and is the foundation of the EU’s single financial services market.

In London, banks can issue loans to EU companies to help them raise funds in the capital market, purchase foreign currencies, or purchase protections against changes in interest rates or exchange rates.

Without it, London banks can only provide more limited services unless they transfer their business to the EU, or if Reach an equivalent agreement, Provide direct market access for foreign financial service companies.

The European Union did agree to a temporary “equivalence” agreement covering central counterparties, which will last until mid-2022 to avoid financial instability after Brexit.

This pair UK Derivatives Clearing House, Such as the huge London Clearing House, where trillions of contracts (euro, dollar, pound, yen…) are processed.

The clearing house acts as an intermediary between buyers and sellers of financial instruments-Brussels has long believed that transactions in euro derivatives should be conducted in the euro zone.

This sounds fair.However, the argument against it is that if clearing houses have as much liquidity as possible and the broadest market vision, they will work best. [a client could, for example, be facing a big loss on a dollar-denominated derivative, but an equal profit on a euro-based security].

As early as February, Andrew Bailey, Governor of the Bank of England, accused the European Union of trying to steal companies from the city. After Brexit, the EU’s recent activities are referred to as “very serious escalations.”

The permanent equivalence agreement will help the City of New York continue to work with European customers.

But to do this, the UK must prove that its rules are “equivalent” to EU standards—increasing the risk of becoming a “rule acceptor” (if Brussels changes its position, London will have to follow suit).This may restrict the UK’s freedom to set its own path in financial services because Listed in today’s roadmap.

In addition, it creates uncertainty for city companies, because if the two parties disagree or severely disagree, the equivalence can be cancelled.

Moving clearing operations denominated in euros out of London is expensive and complicated, so banks have been reluctant to do so (unlike stock trading, which Once Brexit meant that EU financial institutions were prohibited from trading in London, it quickly moved to Amsterdam).

Today, Sunak insists that the United Kingdom will “strengthen” its already powerful central counterparty system, and declared that he “has no substantive reason” that London cannot continue to provide these clearing services to EU countries and other countries.

But this decision is not entirely in his hands-Brussels can continue to put pressure on the company to move the liquidation from London to Frankfurt.

In fact, there was news last month that the European Union required financial market participants to propose legislative reforms to help them transfer the liquidation of euro derivatives from London to the European Union, and Hold seminars with clients of the clearing house Regarding the transfer of Euro interest rate swap contracts worth trillions of euros from London to Deutsche Börse.

As early as March, the United Kingdom and the European Union reached a memorandum of understanding on how to formulate banking and financial market rules. The memorandum of understanding seems to be a step forward-both parties agree that they will work together to “reduce uncertainty” and “identify potential cross-border implementation issues”, (FT has more details here).

However, it did not achieve the legally binding cooperation arrangements that the UK had hoped-and, as we have learned today, did not allow the two parties to reach an equivalent agreement.

Without it-city banks may seek to win more business overseas.It’s worth noting that Sunak specifically pointed out we In today’s speech, he said:

The United States is already our largest market, and the United Kingdom exports $28 billion in financial services every year.

Our goal is to further deepen regulatory cooperation with our closest allies.

The principal also (As mentioned before) Promote the UK to strengthen economic relations with the UK China, Calling for “mature and balanced relationships.”

Despite concerns about human rights and security-including Some Conservative MPs Who ever Promote a tougher policy towards Beijing.