Andreas Dombret of the German Bundesbank claimed this month’s transition deal will not be legally ratified until later in the year, despite it due to be signed off by EU members today.
Britain’s financial services minister John Glen hit back, instead demanding the EU offers financial firms reassurances they can carry on operating as usual during the 20-month Brexit transition deal, unveiled this week by Brexit secretary David Davis and EU negotiator Michel Barnier.
With barely a year until March 29 – the date Britain officially leaves the EU – Mr Dombret urged banks to get new headquarters within the EU – and therefore outside London – by next March in case there is a “hard” Brexit.
Speaking in Dublin, Mr Dombret said it was “too early to lay back” despite the stated EU-UK goal of a transition to make Brexit “less painful”.
He added: “Many issues are still to be discussed and the transitional period is still not fully guaranteed.
“The . . . phrase that ‘nothing is agreed until everything is agreed’ still holds true.”
Banks want British and EU regulators to tell them they won’t need all their Brexit contingency plans in place by March next year, when Britain leaves the bloc – meaning they can rely on the transition deal agreed between Britain and the European Union.
Mr Glen said: “Until the transition deal is ratified there is reluctance on the part of some regulators to make unambiguous statements.
“There is no need for any ambiguity to exist because once the political agreement is secure on transition period then I expect regulators to make reasonable and appropriate reassurances.”
The Bank of England and Financial Conduct Authority have issued no statement on Monday’s transition deal.
EU summit chair Donald Tusk said on Wednesday the bloc’s leaders will on Friday offer Britain a transition deal. But a draft of the deal showed it will only be finalised once outstanding issues such as the Irish border are resolved.
Financial firms in Britain are concerned about what sort of access they will have to the EU market after the transition period ends in December 2020.
In draft guidelines this week, the EU referred to “reviewed and improved equivalence mechanisms” administered on a “unilateral” basis by the EU.
Equivalence refers to Brussels granting market access to foreign financial firms if it deems their home rules to be as strict as those enforced in the bloc.
Brexit has prompted Brussels to toughen up its equivalence rules for foreign clearing houses and investment banks.
Mr Glen said the EU guidelines helpfully recognised that financial services have to be dealt with.
However, he added: “The EU equivalence regime does not give financial institutions in Britain the level of security they need.”
Britain and its banks want a more ambitious “mutual recognition” trade pact whereby Britain and the bloc accept each other’s rules to allow cross-border business to continue.
Such a trade deal in financial services has never been done before and one banker said this week that mutual recognition could be a pipe dream.