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City minister Lucy Rigby will on Wednesday travel to Brussels to seek areas of future UK co-operation with the EU on financial services, but crucially stop short of any return to alignment with the bloc’s rules.
Rigby, who will meet EU financial services commissioner Maria Luís Albuquerque, told the FT that both sides could work together more closely, even as Britain diverges from the EU’s rule book after Brexit.
Prime Minister Sir Keir Starmer has excluded financial services from a wider government drive to seek areas of “alignment” with the bloc’s single market, in recognition that most City groups value Britain’s regulatory autonomy.
But Rigby said: “Our financial services sector is world-leading, and helping it act as an even better engine for growth will be top of my agenda.
“There’s room for working together in a whole host of different areas with the EU, as we have done with settling trades, to cut costs for firms on both sides of the Channel, boost investment and drive shared growth.”
A report published on Wednesday by the City of London Corporation and New Financial, a research firm, called for “closer co-operation in new areas such as sustainability or digital assets”.
It identified last year’s temporary extension of an “equivalence” deal to allow EU banks to access UK derivatives clearing until 2028 as another area where the market would benefit from a longer-lasting solution.
But it also warned that a recent capital requirements directive in Brussels would prevent banks in the UK and other countries from lending to clients in the EU, unless they had a branch in that country from next year.
Albuquerque attended chancellor Rachel Reeves’ Mansion House speech last year in a symbol of a post-Brexit attempt to co-ordinate action to avoid market disruption, notably given London’s central role in the European financial services sector.
The UK last year decided to move to a single day T+1 settlement system for equities, bond and fund trades in October 2027, mirroring the timetables of the EU and Switzerland.
Eventual co-ordination averted the risk of banks having to adopt a T+1 system at three different times for UK, EU and Swiss securities — which had been a concern given initial fears about the lack of a joined-up approach.
But things have not always run smoothly, in spite of the creation of a joint EU-UK regulatory forum and Reeves’ insistence at a meeting of Eurozone ministers last year that she wanted an “ambitious” economic partnership with the bloc.
Brussels bristled when the UK unilaterally said it would postpone a crucial part of the Basel reform — the so-called fundamental review of the trading book — to 2027, once again forcing the EU to follow suit for this part of the reforms, and without prior warning or co-ordination.
Officials from London and Brussels meet a couple of times each year in the joint regulatory forum, which is designed to improve co-operation between them.
But it has so far failed to achieve harmonisation in important areas such as in the implementation of so-called Basel III bank capital rules, or on the plan to launch consolidated tapes to provide single streams of price and trading data for UK and EU equity and bond markets.
“Greater UK-EU connectivity in financial and professional services — in those areas where we’re already aligned — can accomplish those wider objectives which we all share,” said Chris Hayward, policy chair of the City of London Corporation, the governing body of the Square Mile.
Miles Celic, chief executive of The CityUK, has warned against an alignment of UK rules with Brussels but said the lobby group was “strongly supportive of exploring areas of future mutually beneficial co-operation”.
