On 16 December 2017, we blogged that the House of Lords’ European Union Sub-Committee (the Sub-Committee) had published its report on Brexit and financial services. The report has five chapters covering: (i) financial services and the UK economy; (ii) passporting, equivalence and market access; (iii) the impact of the loss of passporting; (iii) beyond market access – free movement and FinTech; and (v) the way forward (including planning and transition).

The Sub-Committee has now received a response from Baroness Neville-Rolfe, Commercial Secretary to HM Treasury setting out the Government’s response. The Government’s response includes the following points:

  • the UK’s future relationship with the EU will be the subject of negotiation, but the Government’s ambition is to construct a future relationship based on reciprocal market access and cooperation, underpinned by a high-quality regime reflecting international standards;
  • HM Treasury will have responsibility for the negotiation on financial services. The Department for Exiting the European Union has responsibility for overseeing negotiations to leave the EU and establishing the future relationship between the UK and the EU;
  • euro-clearing is an important part of the overall financial structure in London that cannot easily be separated from clearing in other currencies. This is largely due to the economic efficiencies of multi-currency clearing noted in the Sub-Committee’s report. These efficiencies can be very significant and benefit firms in Europe as well as the UK and internationally. However, when Britain leaves the European Union, there will still be a number of countries who do not use the euro currency who are inside the European Union and thus entitled to the protections afforded by the Single Market. It is not clear that the rules of the Single Market even after Britain has left would permit the European Central Bank to require euro denominated instruments to be cleared inside the Eurozone; and
  • the Government’s vision is that an agreement about the UK’s future partnership will have been reached by the time the 2-year Article 50 process has concluded. The Government will seek to avoid a disruptive cliff-edge as the UK exits the EU and will aim to agree a phased process of implementation which will provide time for businesses and regulators to adapt to the terms of the new relationship.

View Government response to Brexit: financial services report, 20 March 2017