An ambitious free-trade agreement (FTA) covering financial services would allow big international banks to keep jobs in London, according to JP Morgan.
A trade deal would be more preferable than alternative equivalence arrangements, the US bank’s international head of regulatory affairs, Sally Dewar, said.
An FTA “would be a much more usable form of market access for the [EU] Single Market for financial services, and that would allow us to continue to use London as a hub going forward,” she told the House of Lords EU financial affairs committee today.
The government is currently aiming to agree a trade deal between the UK and the EU which includes services in its scope, a relative rarity in international trade outside of the Single Market.
An FTA covering financial services would have to put in place a mechanism to resolve divergence in regulation between the UK and the EU, one of the trickiest aspects of allowing secure market access as the two jurisdictions separate.
Yesterday Brexit secretary David Davis referenced a report by the International Regulatory Strategy Group, a body working on regulation backed by the City, which suggests a blueprint for such an agreement.
The main alternative for UK-based financial services to continue to serve clients in the EU is relying on the existing equivalence regime used by non-EU financial services.
However, equivalence “doesn’t represent a long-term sustainable solution” for financial services, Dewar said.
“It is a very limited regime; it puts the EU in the driving seat,” she said. “It’s an uncertain form of market access.”
An enhanced equivalence framework may have a short-term use “if in place at the point of Brexit”, Dewar added, but after a transitional period “it doesn’t put the UK on a level playing field”, she said.