MNI INSIGHT: BOE Call For EU Brexit Help Scorned As Lobbying

--BOE Call Seen As Attempt To Detach Transition Deal From Withdrawal Agreement

By David Robinson

     LONDON (MNI) - There is a commonplace view among European Union officials

that the Bank of England's exhortations urging EU authorities to back temporary

arrangements to help financial sector firms in the event of a hard Brexit are a

blatant attempt to uncouple a transition deal for financial services from the

Brexit negotiation process, MNI understands 

     From the EU's perspective, the UK government's desire for a transition

period after Brexit that comes into force in March 2019 gives the union a lot of

leverage in Brexit negotiations. 

     The BOE is publicly seeking a "temporary permissions" agreement for

financial services under which both the UK and EU authorities would allow

financial sector firms to carry on, for a time, pretty much as they were in the

event of no Brexit deal, effectively replicating the benefits of a transition

period.

     MNI understands that from the perspective of officials in Berlin, Brussels

and Paris, this is seen as the BOE trying to get the benefits of a transition

deal detached from the EU Withdrawal Agreement -- which if it succeeded would

reduce the EU's leverage in the negotiations.

     The fact that the top BOE officials have been repeatedly and very publicly

calling over recent days for such a deal is viewed as a sign of weakness, not

strength. Typically central bankers negotiate out of the limelight and if things

were going well, there would be no need for them to seek publicity.

     --BOE USES FSR AS BILLY CLUB

     Bank of England Governor Mark Carney, Deputy Governor for Financial

Stability Jon Cunliffe and Deputy Governor for Prudential Regulation Sam Woods

all spoke at the June 27 press conference following the release of the BOE's

quarterly Financial Stability Report. All made the case for the EU to match the

UK's proposed temporary permissions regime for financial services.

     The constantly repeated message was that financial sector firms would face

a morass of technical difficulties over the legal status and servicing of

financial contracts when Brexit occurs in March 2019, with swathes of

derivatives and insurance contracts between UK and EU entities to be sorted out.

     Carney noted that the the UK government has signalled its willingness, if

necessary, to create a temporary permissions regime for all European Economic

Area financial institutions who are providing financial services here. But to

make it work "requires action on the European side as well, and at the end of

June 2018, the European side has not yet indicated how it will address those

issues."

     The concern for the BOE is that the EU negotiators do not want the EU

institutions to replicate what the UK is offering on temporary permissions for

financial services, as this would undermines their negotiating stance, and the

EU institutions so far are holding firm to this line, with Carney's call for an

EU response falling on deaf ears.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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