Post by Recliner
We don't want the trade deal to cover banking, and are not seeking
'equivalence' status if that would mean conforming to EU banking
regulations, as the EU seems to want.
The wording of the "euqivalence" status implies that it would mean
conforming to EU regulations but not being governed by the EU watchdog.
So why does the EU grant equivalence to countries with completely different
banking rules, such as Australia, but not to the UK with identical rules?
Given that the EU banking regulation are mostly written by the UK, I am
not quite sure what's so bad about it.
The UK expects EU rules to change in ways that don't work for a world
banking centre, while the UK rules are likely to change in ways that
strengthen it as a world banking centre.
Post by Recliner
However, the EU is currently in clear violation of WTO rules in this
area, which we've chosen not to act on just yet.
As far as I understand it, WTO provides rules for goods, not for
services. What WTO rules can there be on banking?
Quite from (ie, the article author's opinion, not necessarily mine)
The EU risks violating international law if it continues to deny the UK
“equivalence” in financial services already granted to a string of other
Selective treatment of one state for political reasons breaches the
non-discrimination principle of the World Trade Organisation. It is
Lorand Bartels, an expert in international trade law at Cambridge
University, said: “A good lawyer would reach for Article VII of General
Agreement on Trade in Services (GATS). It is not a slam dunk but it would
be a good case.”
Switzerland explored legal recourse under WTO law after the EU singled out
Swiss exchanges for punitive treatment, although it ultimately stopped
short of pulling the trigger.
Equivalence is a normal courtesy among developed OECD states and even some
that are not. The EU grants Brazil recognition in areas such as insurance,
auditing, credit institutions, exchanges, investment firms, though it would
be a stretch to argue that Brazil’s regulators have higher standards than
their British counterparts.
The UK has unilaterally granted equivalence to the EU across 28 sectors.
Brussels has refused to reciprocate except in two areas, chiefly in
counterparty clearing where the European financial system would otherwise
have been in danger.
Andrew Bailey, Governor of the Bank of England, suggested this week that
Brussels is weaponising equivalence to lock Britain into its system as a
regulatory satellite. “I'm afraid a world in which the EU dictates and
determines what rules and standards we have in the UK is not going to
work,” he said.
The EU says its ties to the UK are fundamentally different from ties to any
other third country, and that equivalence was never designed for such
circumstances. It cannot safely outsource financial stability - and 80pc of
its capital markets - to a hub outside its legal nexus.
But that is a political argument and cuts little ice under WTO rules. “All
WTO members with equivalent standards have to be treated equally. Refusal
to do so goes against the whole Most Favoured Nation principle,” said one
expert advising the Government.
Article VII states that members “shall not accord recognition in a manner
which would constitute a means of discrimination between countries ... or a
disguised restriction on trade in services. Unless an exemption applies, a
WTO member must treat service suppliers from all other WTO members
The EU case is hollow since the UK has rolled over existing European
regulations and is 100pc aligned at this point. Where equivalence is
granted, it can be withdrawn within 30 days. Under any reading, the EU is
engaging in a “disguised restriction on trade in services”.