Banks may lose EU access unless UK abides by Brussels regulations

UK banks risk losing their privileges to do business in the European Union, unless the British government agrees to abide by financial regulation decided in Brussels even after Britain leaves the union, the head of the group of euro-area finance ministers said.

"It is unthinkable that the EU will allow UK-based financial institutions full access to do business in the internal market without a sustainable coupling of future dynamic UK standards to the EU framework," Eurogroup chairman Jeroen Dijsselbloem said in a speech in Brussels on Tuesday. "At the same time I realise that, given the promise of full sovereignty, this will be a hard truth to accept in Britain."

British prime minister Theresa May has signalled the UK would attempt to lure companies and financial institutions with lighter regulation and lower corporate taxes if the EU offers a post-separation arrangement that isn't acceptable to her government. EU officials have responded that such move would damage the prospect of getting a trade deal, while cautioning that, far from regaining its legislative autonomy, the UK may end up being forced to comply with legislation on which it has no input.

A transition period in the relationship between the two sides after Britain leaves the EU will be necessary to avoid a disruptive process that would damage both of them, according to Mr Dijsselbloem, who is also Dutch finance minister. Two of the topics that will require special attention during the talks are taxation and the relationship between financial regulation for London and for banks based in the EU, he said.

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“We have heard threats of going rogue and creating an offshore tax haven,” Mr Dijsselbloem said. “That would be a huge mistake, and it would certainly stand in the way of a fair trade deal that would suit us both.”

– (Bloomberg)