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Valdis Dombrovskis, the European Union’s financial services chief, warned today that Brussels will be stringent in assessing any application by Britain to use EU “equivalence” rules to secure financial-market access after Brexit.
Mr Dombrovskis, a vice president of the European Commission, noted that the equivalence system of overseas market access had, so far, mainly been used for countries that are “less interconnected” with the EU than the UK.
For the UK, “we would need to assess deeper, and ensure financial stability and other risks for the EU economy are duly addressed,” he told the European Parliament’s economic and monetary affairs committee on Tuesday.
The equivalence system allows the EU to grant enhanced market access for countries judged to have systems of financial regulation and supervision comparable to those in Europe. The City of London has identified it as a key fallback option after Brexit, when it will lose its “passport” to offer services across the single market.
Mr Dombrovskis said “withdrawal of the UK from the EU will mean in principal that UK-based entities will lose passporting rights and the UK as any other third country can apply for equivalence”.
He also said the EU was watching developments across the Atlantic closely, with the Trump administration having announced its intention to review the Dodd-Frank regulations put in place after the 2008 financial crisis.
The US currently benefits from over a dozen different equivalence decisions from the EU, granting access for key financial activities.
Equivalence decisions depend on the other country sticking to rigorous standards of regulation and supervision, Mr Dombrovskis said, adding that they would be reviewed if circumstances change.