Britain is expected to keep the door open for European Union banks and investors after Brexit to try to preserve London’s global financial clout, irrespective of whether it gets a good trade deal from the bloc, bankers and industry officials say.
Nerves in the City of London financial district were rattled last month when the UK government proposed future financial services trade with the EU based on “reciprocal” arrangements.
Bankers worried this meant that if the EU did not give Britain broad market access, London would impose tit-for-tat restrictions on EU banks or even tighten up treatment of all foreign lenders.
“But the Treasury later told us it does not mean that. Reciprocity would make the City very nervous,” a senior international banker in London said, speaking on condition of anonymity due to the sensitivity of the matter.
The Treasury had no immediate comment on Tuesday.
At stake is one of the most liberal and lucrative financial services trade regimes in the world.
“The City has grown up by being everyone’s playground and that needs to continue. The White Paper was not to be read as limiting market access coming into the UK,” said a senior financial sector official, referring to the government’s Brexit plan published last month.
Britain allows non-EU “third country” banks to operate as a wholesale – but not retail – branch in London, meaning it doesn’t require costly capital cushions that subsidiaries have.
It also allows overseas entities to offer a wholesale service without a permanent UK base, subject to some conditions.
“The UK’s approach to third country firms may be regarded as one of the main factors which have made it one of the world’s leading financial centres,” said a European Parliament study on Brexit.