London could lose status as EU’s financial hub

The Netherlands' Finance Minister and president of the Eurogroup Jeroen Dijsselbloem

London may lose its commanding position as the financial hub of Europe once Britain has left the European Union, Eurogroup president Jeroen Dijsselbloem said Thursday.

“It will be hugely complex to allow the City to remain that service centre for Europe if there is a divergence of regulatory standards over time,” Netherlands finance minister Dijsselbloem, who chairs gatherings of finance chiefs from the 19-nation eurozone, told a Berlin conference.

Britain is set to leave the EU in 2019 after voters chose to walk out at a referendum last June, prompting the government to trigger two-year exit negotiations last week.

Brexit will likely mean London banks lose so-called “passporting rights” which allow them to sell financial services unhindered across the remaining 27 European Union member states — prompting fears for their business and also EU firms’ access to financing

“Declaring the rules and regulations of the UK equivalent to that of the EU at the outset is quite easy,” Dijsselbloem said — referring to hopes that the Continent and London could lift barriers to financial flows by recognising one another’s regulatory regime.

But “over time, our standards and our way of supervision will start to diverge,” he continued.

“If you want to maintain equivalence over time, you will have to commit also in the long run to stay close to the European standards.”

The politician called for “very close cooperation on financial regulation, because otherwise it will damage the European economy and of course the City.”

More broadly, he urged negotiators on both sides to “keep (the UK) as close as possible” in talks on future relations and a trade deal.

“We really have a joint responsibility and a joint interest to try and reach that good trade deal and really try to minimise the damage,” Dijsselbloem said.