THE UK and EU have been warned to make progress on EU financial market access due the impacts the coronavirus pandemic will create, according to a bank lobby group.
On Monday, the Association for Financial Markets in Europe (AFME) said that the Covid-19 pandemic will make it harder to cope with any potential disruption in the case that there is no agreement made between the EU and UK. Britain is still in the transition period until the end of the year which means the country has full access to the trade bloc.
Any future direct EU access after the transition period is over will be decided by whether Brussels feels the UK regulation is “equivalent” to the standards set in the trade bloc.
The EU will not be able to use financial services in London without some agreed access.
In a statement, AFME said: “Covid-19 has the potential to disrupt Brexit planning including impacting client readiness, as well as potentially affecting the ability of firms to relocate staff to other jurisdictions.”
The group said that the negotiations need to ensure that EU investors can continue using clearing houses in London.
They said this needs to be addressed before September to make sure customers do not have to move derivatives positions elsewhere.
AFME also said that a two-way access in stock and derivatives trading was needed to minimise disruption.
The group has asked for a formal framework for EU and UK regulators to ameliorate differences that could harm access.
They said: “This is particularly important in the context of the fast-evolving legislative agenda in the EU being proposed, due to be implemented, or under review in the second half of this year and the first half of 2021.”
Last week Michel Barnier, the EUs chief Brexit negotiator, said that financial firms must be ready for big changes in January.
He said: “We will only grant equivalences in those areas where it is clearly in the interest of the EU, of our financial stability, our investors and our consumers.”
According to Reuters, London and Brussels accused each other of missing the deadline on 30 June for assessments on financial market access from January.
The missed deadline has reportedly sparked fears of lengthy uncertainty as groups are already being confronted with the effects of the coronavirus crisis.
Speaking to the Financial Times, Patrick Thomson, chief executive of JPMorgan Asset Managements business in Europe, the Middle East and Africa, highlighted how a no-deal Brexit would create “more complexity” for fund companies.
He said: “We have got enough on our plate with the Covid-19 recovery and understanding if markets have got ahead of the economic indicators.
“Given the pressure the asset management industry is already facing in terms of fees and [the need to invest in] technology, to introduce further uncertainty would not be helpful at this time.”
This comes as the second week of face-to-face Brexit negotiations commences.
Mr Barnier has said that the blocs position needs to be “better understood and respected” by the UK side if a trade deal is to be made.
The UK has already refused to extend the transition period deadline at the end of the year.
Speaking to LBC Radio, Prime Minister Boris Johnson said he was “more optimistic” than Mr Barnier about the chances of a deal being struck.
He said: “I am not remotely disrespectful of Michel or the EU system that I understand deeply.
“But I just dont think its right for us to proceed on the basis of the European Court of Justice continuing to arbitrate in the UK or us having to continue to obey EU laws when we are out of the EU.”
Five weeks of in-person Brexit talks are planned for July and early August.