MiFID2, which comes into effect on 1st January 2018, allows a financial institution outside of the EU to provide cross-border services into the EU. To do so they must register with ESMA, and to qualify for this their domestic regulations must be deemed "equivalent" to those of ESMA.
Given that Article 50 negotiations will take at least two years, the UK regulations will not only be equivalent but will actually be identical, six months or more before Brexit takes effect. The financial industry is increasingly international in nature, and these regulations would only then diverge in extreme circumstances.
We shouldn't stop there, however. The government can use Article 50 negotiations to broker an improved deal that works for both sides to reduce paperwork and red-tape. Currently many EU financial institutions "passport" into the UK to enjoy access to our markets and, since "equivalence" must be reciprocal, the EU will be incentivised to make this mechanism work as smoothly as passporting does today.
If the government ensures all interests are on the negotiating table at the same time, an improved win-win agreement is clearly achievable. For example, financial services are important to the UK in the same way that car exports are important to Germany. Even in the worst case, equivalence will enable UK-based institutions to continue to service the EU via equivalence and the cost of ESMA registration will still be far smaller than the cost of relocating and running a business to the Continent.
The City has become the world's leading financial centre for a number of reasons including law, language, timezone, reputation, skilled workforce and labour laws. In competitive strategy we call this a mutually reinforcing set of hard-to-replicate resources and activities. What the City is currently lacking is a dynamic vision, and we can reclaim that when we Vote Leave.
When we leave we will be able to:
- Repeal, revise and avoid regulation that is damaging the City and making us less competitive.
- Hire the best talent from around the world to ensure the City stays competitive
- Sign trade deals with growing international markets, and ensure those deals are right for us
- Decouple ourselves from the ongoing Euro crisis.
Vote Leave is the safer choice for the City. It is also the choice that will fuel growth.