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The European Union’s markets regulator urged lawmakers on Wednesday to give it “rapid” response powers to deal with problems that may arise after Brexit.
The European Parliament has proposed that the European Securities and Markets Authority (ESMA) should have powers to issue “no action letters” that tell firms they will not face sanctions if they do not comply with a rule or deadline after Britain leaves the EU.
Such letters are used by U.S. regulators, and would avoid the EU having to make time-consuming legislative changes if temporary problems with rules crop up.
After Brexit, the EU will have a large, liquid and interconnected capital market next door which is no longer subject to the bloc’s rules, Steven Maijoor, chair of the European Securities and Markets Authority, said.
“This creates the need to have tools to react rapidly to new developments,” he told an industry event in Dublin.
Lawyers said the comments signaled an arm’s length relationship with the EU for Britain’s financial sector after decades of being deeply interlinked.
“The reference to the large liquid market ‘next door’ emphasizes the imminent gulf between London and the EU, with their interconnectivity a justification for enhanced regulatory vigilance, rather than an opportunity for convergence,” Simon Morris, a financial services lawyer at CMS, said.
Banks and insurers in Britain face patchy access to EU customers in future, based on a system of market access known as equivalence and used by Japan and the United States.
Maijoor signaled that Brexit would mean a more hands-on approach to applying equivalence to the EU’s neighbor.
“Equivalence assessments need to be conducted more frequently to detect changes on time,” Maijoor said.
The bloc is toughening up conditions for granting access to foreign clearing houses and Maijoor said it was essential that these changes were completed in time for Brexit.
London-based LCH dominates clearing of euro denominated derivatives, and its chief executive said on Wednesday there was no sign of big shifts in volumes to rivals.
(Reporting by Huw Jones; editing by Alexander Smith)