Brexit update for financial services firms - week ending 21 September 2018

25/09/2018

  1. EC: Statement by Donald Tusk Texts of the short statement given on 20 and 19 September 2018 follow. Click here to access the full statement from 19 September and here for the full statement from the 20 September. Quotes form the statement made on 19 September: “The Brexit negotiations are entering their decisive phase. Various scenarios are still possible today, but I would like to stress that some of Prime Minister May's proposals from Chequers indicate a positive evolution in the UK's approach as well as a will to minimise the negative effects of Brexit. By this I mean, among other things, the readiness to cooperate closely in the area of security and foreign policy. On other issues, such as the Irish question, or the framework for economic cooperation, the UK's proposals will need to be reworked and further negotiated. Today there is perhaps more hope, but there is surely less and less time. Therefore, every day that is left, we must use for talks. I would like to finalise them still this autumn. This is why, at tomorrow's meeting of the twenty-seven, I will propose calling an additional summit around mid-November.” Quotes from statement made on 20 September: “At our EU27 working lunch today we had a good discussion on Brexit, which once again reconfirmed our full unity. Let me highlight three points. First, we reconfirmed that there will be no Withdrawal Agreement without a solid, operational and legally binding Irish backstop. And we continue to fully support Michel Barnier in his efforts to find such a model. Second, we agreed to have a joint political declaration that provides as much clarity as possible on the future relations. Everybody shared the view that while there are positive elements in the Chequers proposal, the suggested framework for economic cooperation will not work. Not least because it risks undermining the Single Market. Third, we also discussed the timetable for further negotiations. The moment of truth for Brexit negotiations will be the October European Council. In October we expect maximum progress and results in the Brexit talks. Then we will decide whether conditions are there to call an extraordinary summit in November to finalise and formalise the deal.”
  2. PMO: Statement by Theresa May The statement given by Theresa May on 21 September 2018 following the Salzburg summit has been published. The full statement can be accessed here. “The first is our economic relationship after we have left. Here, the EU is still only offering us two options. The first option would involve the UK staying in the European Economic Area and a customs union with the EU. In plain English, this would mean we’d still have to abide by all the EU rules, uncontrolled immigration from the EU would continue and we couldn’t do the trade deals we want with other countries. That would make a mockery of the referendum we had two years ago. The second option would be a basic free trade agreement for Great Britain that would introduce checks at the Great Britain/EU border. But even worse, Northern Ireland would effectively remain in the Customs Union and parts of the Single Market, permanently separated economically from the rest of the UK by a border down the Irish Sea.”
  3. House of commons Exiting the EU committee: THe progress of the UK’s negotiations on EU withdrawal (June to September 2018) The Committee's report discusses aspects of the White Paper and includes a section on financial services and equivalence. It suggests that "enhanced equivalence is an ambitious goal … it is a pragmatic negotiating objective, given the contribution that the financial services sector makes to the UK economy and its importance to the economies of our trading partners in the EU". The full report can be accessed here. “It is unclear to what extent trade in services can be separated easily from goods, as many exported goods include a service or maintenance contract. This is especially true of data and communications products such as smart phones, but it is also true of manufactured goods such as lifts or aeroplane engines, which require engineers to fit and maintain components on an ongoing basis. Catherine McGuinness told us that her members have said “that the real value and the profit that they make on a number of the goods that they sell is almost entirely the service contract”. She described the division of goods and services as “a false distinction”.” “Catherine McGuinness said that the City of London Corporation “did not welcome the White Paper and the way that it treats financial services”. She was concerned that equivalence does not cover the whole of the financial services sector and that the European Union could withdraw it for political as well as legal reasons.” “Witnesses were sceptical that the Government would be able to negotiate an enhanced form of equivalence. Catherine McGuinness described it as an “uphill task to persuade the EU27.107 Huw Evans said that “it is a very ambitious ask” because the Government was asking for the European Union to let the UK have a say over how the third country equivalence regime would operate in future, “whereas… the equivalence mechanism in the third country regime is something that the EU considers proprietary. It is theirs.””
  4. EC: State of the Union address

The EC has now published the text of the address, given on 12 September 2018, in which Jean-Claude Juncker refers to aspects of Brexit. The full text can be accessed here.

“In the past months, when we needed unity in the Union, Britain was at our side, driven by the same values and principles of all other Europeans. This is why I welcome Prime Minister May's proposal to develop an ambitious new partnership for the future, after Brexit. We agree with the statement made in Chequers that the starting point for such a partnership should be a free trade area between the United Kingdom and the European Union.”

Other publications from the RegZone Brexit news feed

EC: Statement by Michel Barnier

Text of Michel Barnier's 18 September 2018 statement on the backstop follows. The full text can be accessed here.

HoC: The future of sanctions

This HoC library briefing considers the effect of Brexit on sanctions policy in the UK and the EU as well as the broader international outlook. The full paper can be accessed here.

HMT: Inaugural meeting of US-UK Financial Regulatory Working Group

HMT has published a short note of the meeting held in London on 12 September 2018. Topics under discussion included the outlook for financial regulatory reforms and future priorities, including possible areas for deeper regulatory cooperation and the implication of Brexit on financial stability and cross-border financial regulation, including contract continuity. The next meeting will be held in Washington DC in the first half of 2019. The note can be accessed here.

EC: Statement by Donald Tusk

Donald Tusk's "invitation letter" published ahead of an informal meeting of the Council on 19/20 September 2018 follows. Topics under discussion will include a review of the progress of Brexit. The full letter can be accessed here.

IMF/HMT: Brexit

Press statements made on 17 September 2018 from Christine Lagarde and Philip Hammond on Brexit follow. The statement by Christine Lagarde can be accessed here, the statement from Philip Hammond here and the press statement here.

CMS RegZone publishes weekly updates (available via email, on-line and via Twitter) on Brexit developments for financial services firms. These provide analysis and commentary on significant developments during the week in question. A daily digest of Brexit news (without analysis or commentary) is also available by email here and online via the RZ news wizard here (both of these can be filtered using the Brexit topic). Links to publications are contained in each update; publications released before the updates commenced in April 2018 can be found in a bibliography here. CMS RegZone publication ‘Where we stand’ provides an overview of the current position in a single report; this is updated regularly to take account of the key developments from the weekly updates.