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British and US Banks at loggerheads over ties with EU ahead of Brexit

Jess Shankleman, Harry Wilson, and Robert Hutton |/ 10 Feb 19 | 09:23 AM

With just seven weeks to go before Brexit, it’s not just UK politicians who are bitterly divided over the country’s withdrawal from the European Union -- large banks are also at loggerheads.

British lenders and their Wall Street rivals are pushing widely different views on Brexit, a clash that was highlighted at a meeting this week with UK government officials, people with knowledge of the situation said.

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While US banks want Britain to maintain the closest possible ties with the EU after Brexit, UK banks and insurers are anxious they don’t become beholden to new laws made by Brussels, two of the people said.

Representatives from eight finance and insurance trade groups met on Tuesday with the Economic Secretary to the Treasury John Glen, who is working on the government’s “global financial partnership" strategy that seeks to boost London’s ties with financial trading hubs after Brexit.

The plan is expected to be announced by the Chancellor of the Exchequer Philip Hammond after next month’s update on public finances, according to another person familiar with the matter.

British banks have had to lower their expectations for how they’ll do business with the EU after Brexit. The UK government dropped its initial demand that they retain easy access to the single market. Instead, the country’s financial industry will have to make do with the same framework available to other non-EU countries, an arrangement known as regulatory “equivalence."

Under the Norway-style Brexit deal that some politicians are advocating, the UK would be subject to a number of rules, such as the General Data Protection Regulations that cover companies holding EU residents’ personal data. British banks would be required to adhere to any changes in the rules even though UK politicians would no longer have a say in how they evolved.

However, many US banks are unfazed by the Norway model in which the UK would remain in the European Economic Area free-trade zone, because they already essentially see themselves as rule-takers, the people said.

A spokesman for the Treasury declined to comment on the meeting.

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