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EU nations still debating how to treat the UK after Brexit
[BRUSSELS] European Union countries are still debating exactly what kind of access to give UK banks after Brexit, but some are pushing for the bloc to agree a fixed position as early as October.
While chief negotiator Michel Barnier has said the UK's plan for the City won't work, several countries want to take some of Britain's proposals on board, three EU officials said. The bloc is currently rewriting its rules for how to treat non-EU banks, and some governments would like UK ideas to feed into that.
The EU has been clear since March that it wants full autonomy and control over how UK banks operate in the bloc after Brexit, rejecting proposals for joint oversight and insisting that the system US banks are subjected to, known as equivalence, is all that's on offer. But back in March, France and Luxembourg - on opposite ends of the spectrum of opinion about how harshly to treat the City - drafted a compromise document that called for "improved equivalence."
It's a phrase that was intentionally ambiguous and the debate - a nuanced one - continues, officials said.
One of the key questions in the Brexit process is how much detail about the future relationship - including the crucial issue of financial services - will be pinned down before the UK leaves. Brexit is being negotiated in two phases - first the divorce agreement and then the final trade deal after Britain has left. The divorce agreement will be accompanied by a political statement about what each side wants from the future trade deal, and there's debate about how detailed and definitive it should be.
Some countries, particularly the UK's closest trading partners, want questions about the future economic relationship left open, to be worked out during the 21-month transition period after Britain has left. They hope the UK government will gradually shift its red lines and opt to remain closer to the bloc. But other countries, along with the European Commission and the European Parliament, want a more detailed plan before Britain's departure, the EU officials said.
That could be bad news for Britain. Even the softest EU position will probably mean the UK has to make more concessions. It also means that when UK lawmakers vote on the Brexit deal they'll do so knowing how little the EU is giving away, they said. Both sides are aiming for a divorce deal in October which would then go to Parliament in the fall.
The UK also says publicly this "political declaration" needs to be comprehensive enough to convince lawmakers to vote in favor of the Brexit deal and accept the estimated £39 billion (S$69.9 billion) financial settlement. One UK official said the plan needs to be "wide-ranging and precise." Another said it could run to about 70 pages.
A final decision hasn't been made and will be the topic of discussion in UK-EU talks over the next three months, the EU officials said. The political declaration is designed to form the basis of full negotiations on a trade deal.
The government's "White Paper" on the future relationship published this month envisages the UK staying aligned to the EU's rules on goods but not services and mirroring much of the bloc's customs framework "as if in a combined customs territory." EU officials say they are opposed to many aspects of the U.K. plan. Barnier welcomed it in public last week, even as he raised many concerns.
On financial services, the UK wants a beefed-up version of the EU's existing equivalence model. The UK has suggested joint oversight of the system that would make it more difficult for UK access to be withdrawn. Under current rules the EU has sole authority to cut access off at 30 days' notice - a setup banks say is unwieldy, not good for financial stability, and can be open to political meddling.