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November 2, 2018

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Financial markets deal close for UK, EU

The United Kingdom and the European Union have made progress on a deal to give London’s dominant financial center basic access to EU markets after Brexit, two British officials said, but no agreement has yet been clinched.

The deal being discussed would be based on the EU’s existing system of financial market access known as “equivalence” — a watered-down relationship that officials in Brussels have said all along is the best arrangement that Britain can expect.

The Times newspaper said a tentative deal had been reached on all aspects of a future partnership on services, as well as exchange of data and including what would amount to a concession from the EU on bending the “equivalence” rules.

Officials in Brussels and London said The Times report was wrong.

“We are making progress,” a British official, who spoke on condition of anonymity, told reporters. A second British official said that, while there was progress, nothing was finalized.

A spokesman for Prime Minister Theresa May said reports of a deal were speculation and that Britain wanted to go beyond the existing equivalence regimes.

The European Commission said a future financial services agreement would only be discussed after a Brexit divorce deal has been finalized.

Talks over a broader deal are mired in a disagreement over an Irish backstop — an insurance policy to ensure there will be no return to a hard border on the island of Ireland if a future trading relationship is not in place in time.

Many top bankers fear Brexit will slowly undermine London’s position as the world’s biggest international financial centre, and a Reuters survey found that, so far, just over 600 are moving away.

Global banks have already reorganized some operations ahead of Britain’s departure from the European Union, due on March 29.

The pound jumped following The Times report and after the Bank of England hinted at a slightly faster pace of interest rate increases. But BoE Governor Mark Carney also warned all bets were off if next March brought a “disruptive” EU departure.


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