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--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
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
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: email@example.com