The EU is keeping an eye on the UK’s post-Brexit financial plans

The UK’s post-Brexit banking deregulation efforts are being viewed with some unease by the EU given sanctions against Russia.

Financial services were not part of the EU-UK trade deal of December 2020, but both sides signed a memorandum of understanding last year pledging to work together.

However, Brussels has halted any progress in this area as a major dispute over Northern Ireland drags on.

The European Commission’s financial services chief, Mairead McGuinness, said the bloc was “watching with interest the UK’s plans for its financial services sector”.

“Financial services deregulation has no place in a financial system that is already too opaque,” she said Irish Independent.

“The global financial system will come under scrutiny as we witness efforts to freeze the bottomless wealth of Russian oligarchs and their efforts to protect that wealth.

“Dirty money has no place in any financial system – neither those of the UK nor those of the EU.”

The UK has already announced measures to cut red tape in government procurement contracts, data protection and drug approvals, but it has been less clear which EU banking rules it wants to repeal.

Last week, the Irish-born Lord Mayor of the City of London, Vincent Keaveny, called for the establishment of a promised EU-UK Financial Regulatory Forum, a sort of chat room for both sides to discuss proposed legislation.

The EU meets twice a year with the US in a similar format and also has joint forums with Japan, Switzerland and Canada.

The Banking and Payments Federation of Ireland (BPFI) says the EU-UK forum would help “restore trust and cooperation between the two blocs” and that “now is the right time” for its establishment.

The BPFI also notes the lack of regulatory “equivalence” between the EU and the UK in areas such as derivatives and equities, and EU exposures to UK sovereigns, banks, investment firms and stock exchanges.

While the European Commission has given UK-based clearing houses temporary permission to continue processing euro-denominated trades until 2025, it has no interest in adding other areas to its “equivalency” list as long as political tensions surrounding Northern Ireland persist .

The bloc is in the process of building its own handling infrastructure so it no longer has to rely on the UK.

Ireland exports EUR 450 million worth of financial services to the UK, more than 10 per cent of all services are exported to the UK, while UK operators sell EUR 14 billion of financial services here.

“We have many common interests in this area, including digital finance, sustainable finance and the fight against money laundering,” said Ms McGuinness.

“Brexit has not removed the need for such cooperation and coordination between the EU, UK and US and many others. In fact, it has increased the need for global collaboration.”

Mr Keaveny visited Dublin last week where he met with the Central Bank, IDA Ireland and the Finance Minister.

A central bank spokesman said there had been “constructive discussions on a range of issues during the meeting including sanctions, the state of Ireland’s economy and the strong working relationship with UK counterparts”.