An agreement between the UK and the EU to work together on financial services is about to be signed.
The EU and the UK will be able to consult twice a year in a forum to discuss financial standards and regulation.
The long-awaited action is interpreted as a sign that the UK is ready to collaborate more closely with the EU.
The UK and EU financial markets are "deeply interconnected," according to the chancellor, making progress in this area would be advantageous to both parties.
Following Brexit, when the UK would no longer have unrestricted access to EU markets, the memorandum was first described in the UK-EU Trade and Cooperation Agreement.
The text, which is essentially a list of broad shared objectives, was released last month. .
However, calling this an "agreement" is inaccurate. It does not imply that the UK is committing to regulatory alignment with the EU or giving in to any prior demands Brussels may have signaled, such as shifting the processing of some financial instruments denominated in euros out of London.
To discuss "voluntary regulatory cooperation on financial services issues," it means that both parties have agreed to a regular, twice-yearly meeting.
According to the memorandum, "both sides will coordinate positions, share information, and work together to meet shared challenges.".
The action would "set up a forum to facilitate dialogue," according to European Commission spokesperson Daniel Ferrie.
"It does not restore UK access to the EU, nor does it prejudge adoption of equivalence decisions," he continued. In the case of financial services, access to the EU may be granted to foreign businesses if the sector's regulatory framework is deemed to be "equivalent.".
However, it's important to note that this follows the Windsor Framework's adoption as evidence that the UK has changed its approach to the EU from that of previous Prime Ministers Liz Truss and Boris Johnson. This could potentially indicate greater agreement on future regulation. But the text avoids bringing up this subject at all.
Less than 10,000 jobs have moved, despite the fact that the EU accounted for 37% of UK financial services exports in 2019 and the UK maintaining its status as Europe's most significant financial center.
The signing of the memorandum, according to Chris Hayward, policy chairman of the City of London Corporation, "sets the stage for a new era of cooperation with our EU partners.".
"We anticipate that this agreement will help keep the doors to both of our financial services sectors open for business. ".
According to sources in the Treasury, passing this memorandum was made possible by the Windsor Framework's agreement. This suggests that some of the outstanding post-Brexit arrangements will be worked on more closely, not the least of which are the stricter rules regarding rules of origin that are expected to be implemented for automakers.
However, it is unlikely that it will actually result in major changes to financial services anytime soon. There will probably only be time for three forums before the next election.
