U.K. and EU Head for Post-Brexit Battle Over Financial Services as Trading Moves Out of London – Barron’s

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A major chunk of trading in euro-dominated shares has been moving from London to European continental exchanges since the beginning of the week, after the U.K. left the European Union single market, and the two sides are now headed toward uncharted confrontation over the future of European finance.

Financial services werent covered by the post-Brexit trade deal struck just before Christmas between the U.K. and the EU, and U.K. Prime Minister Boris Johnson has admitted that the deal perhaps [did] not go as far as [he] would like on the matter.

On Jan.1, U.K. financial services providers and banks lost the so-called passport that gave them the right to operate without restrictions throughout the EU, and now depend on unilateral decisions from European authorities to extend them an equivalence decision based on regulatory convergence, sector by sector.

Read:What the Post-Brexit Trade Deal Means for Markets and Investors

Billions worth of share trading have moved this week from London to exchanges set up in Amsterdam and Paris, to the tune of about 6 billion ($8 billion) a day.

Bank of England Governor Andrew Bailey told U.K. lawmakers on Wednesday that he didnt expect quick equivalence decisions from the EU, but insisted the country should not become a rule taker by mimicking EU regulations just for the sake of obtaining an access to European markets.

Professionals of the City of London quoted by Financial News said they didnt expect an agreement on financial services to be struck before a few years, the time for EU authorities to assess how much of Londons business will move to the continent.

Also:Its Time to Buy Post-Brexit British Stocks

Looking ahead. The U.K. and the EU have pledged to negotiate a memorandum of understanding by March to sort out the rules under which financial players could operate in each others markets. The EU seeks to repatriate business and jobs, and London wants to keep its financial might without having to abide by EU regulations.

But pledging to negotiate isnt the same as pledging to strike a deal. The only hope is that the talks, most likely led by bureaucrats and civil servants, wont be as politically weighted as the long negotiations over the trade deal last year. That should in theory make some form of agreement easier, even though the two sides respective interests remain at odds.

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U.K. and EU Head for Post-Brexit Battle Over Financial Services as Trading Moves Out of London - Barron's