Brussels ‘demands higher standards from city than communist China’

Brussels has been accused by a powerful committee of Lords of demanding higher standards from the City of London than communist China by granting it access to EU financial markets after Brexit.

A report by the Lords Committee on European Affairs concluded that the EU was playing politics because of its decision to block firms within the Square Mile from the single market.

The bloc has refused to grant the UK a regulatory “equivalence” that allows non-EU countries to access its markets based on how similar or equivalent its rules are, despite the fact that UK rules are broadly in line with its own.

Lord Kinnoul, chairman of the committee, said: “The EU has granted China equivalence in a dozen or more areas. It looks strange and wrong that the United Kingdom was not granted this, given that we are democracies of a similar nature.”

The report said the EU’s decision was “more political than technical” and that the UK “holds itself to higher standards than other countries”.

It comes as the bloc attempts to stage a raid on the Square Mile, forcing its financial services companies to relocate lucrative operations and personnel from London to the Continent.

Miles Selick, chief executive of lobbying group TheCityUK, told the Lords’ committee that “equivalence has always been politicized to some degree”.

Lord Kinnull said the equivalence decision and the financial services MoU between the UK and the EU “became a consequence of the debacle of the Northern Ireland protocol”.

Lord Hill, a former EU commissioner who led a review of UK listing rules last year, told the committee: “They [the EU] think the equivalence decision is a drain and why would you give it before you know you want to give it and in exchange for something else?”

He also said that the war in Ukraine shows how democracies should work together when it comes to financial regulation: “During the current crisis, we have seen that the financial system, the payment system, is part of defense and security.”

Meanwhile, one of the city’s leading lawyers pointed out that the EU’s decision not to provide the UK equivalent is forcing companies to do business elsewhere.

Peter Bevan, a partner at the city’s law firm Linklaters, said: “It actually seems incredible that when Europeans and British counterparties want to trade with each other, they have to travel to another continent to find a place to do so.”

The report also notes that despite the challenges, the UK’s financial services sector has maintained its ‘resilience’, but added that the government should not be ‘satisfied’ with regulatory scrutiny and shifting jobs from the UK to the EU.

Separately, a Treasury ad hoc committee set up a subcommittee to study new proposals for post-Brexit financial services regulation.

This comes after MPs warned Rishi Sunak last week that Brexit is not an opportunity to turn the city into Singapore-on-Thames.

Mel Stride, Chairman of the Treasury Select Committee, said: “With the UK leaving the EU, our regulators have taken on important new responsibilities. This will require careful scrutiny, and there is an opportunity for Parliament to put in place a less bureaucratic and much more flexible process than has previously been the case in the European Union.

“The Treasury Committee is well positioned to conduct this review. We frequently review new regulatory proposals, and given our responsibility to scrutinize the Ministry of Finance and related regulators, we can take a holistic look at regulatory changes.”

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