The current EU financial regulation is by no means perfect, and it certainly cannot afford any risk of watering down already insufficient protections. But that’s exactly what is at stake in the negotiations on a future trade relationship.
In the interest of their citizens, EU states and the UK need to find a way to constructively collaborate post-Brexit. If States prioritise competing for financial services ‘business’ it could have a negative impact on financial regulation and so on all of us. In other words, leaving a large amount of flexibility to amend existing rules could open the door for governments to reduce the level of regulation and protection in the area of financial services.
To avoid this so-called „regulatory race to the bottom“, we think at Finance Watch that the EU states and the UK should agree on fundamental protections in financial regulation that citizens should be guaranteed, no matter what. These protections should include prudential rules in line with the current levels of protection under the EU financial regulation such as the banking package, Solvency II, MiFID II, EMIR, CCCTB/ CCTB and FiCoD. But it should also include conduct of business rules in line with current EU standards, such as the market abuse directive, prospectus directive, consumer credit directive, mortgage credit directive, distance marketing directive, MiFID II, IDD and the GDPR.
Alongside, a regulatory cooperation framework needs to be put in place, which means that these citizens’ protections are carefully enforced, supervised and further developed. We have some ideas on how this cooperation could look like.
But this cannot be done quickly, if we want to do it properly. An easy solution for this is to ensure a withdrawal period of at least five years.
It is a sad truth that EU free trade agreements have repeatedly brought the integrity of the financial services regulatory framework into question and other solutions do not put protection of citizens first.
This time again, financial sector lobbyists have been lobbying hard to influence a future EU-UK trade deal that serves the sector, not just in London but across Europe as well. If the Brexit agreement should not become the next big „deal“ for the financial industry, policymakers should make sure of putting citizens protection first.
- Discover also our old but still solid Beginner’s guide to Financial services in TTIP (also available in German and French):