The Essay On Post-Brexit China-UK: Consequences For Financial Services (70 Characters)

UK's trade deal with China

Question:

Discuss About The Consequences Would A Post Brexit China UK?

A trade deal would work perfectly workable. Away from single market alongside the union customs, UK must emphasize on the continuation of tariff-free trade for commodities and a bespoke arrangement. This should be hinged on the “regulatory equivalence” for the financial services as unique would work for the business. UK should fight for maximum freedom to agree on trade deals with third countries as well as decide and adjudicate its regulations. It should also decide and adjudicate immigration policies. If this is agreed it will work for business. However, Brexit that trades under the World Trade Organization rules could still be flawlessly practicable for business if no agreement is reached. 

As the United Kingdom present stands on the edge of a novel era in UK’s trading relationship with the EU and the rest of the globe, the UK-based financial services sector is still undertaking the assessment of its present and coming position. This paper recognizes the existence of a various substantial number of cross-border business between the EU and UK-encompassing the financial service providers individually, their respective employees, as well as the, served customers. This paper holds that from the business standpoint, the UK must pursue an approach that allows for the continuity of the passporting, regulatory equivalence and that these will only be achieved through a bespoke arrangement (Garcia-Herrero and Xu 2016).

The analysis in this paper appreciates that the Brexit and the shape of the new relationship with the European Union, Remains crucial matters for the United Kingdom-based financial and associated professional services sector and for the broader economy served.  This paper this gives insights into the best Brexit deal to inform the UK government to effectively as well as define the priorities of the industry to help them negotiate for the bespoke arrangement in the coming negotiations to ensure that business continues to thrive (Wright 2016). 

The Bespoke arrangement remains a better deal for the business community. As indicated in the International Regulatory Strategy Group (IRSG) [1] the preference for this arrangement by the UK is business-oriented and a better deal from the business standpoint.  The focus of the Brexit negotiations must be on the design and delivery of a bespoke UK-EU agreement instead of adapting or reformation of prevailing frameworks. The agreement needs to be anchored on mutual recognition besides regulatory collaboration and permit mutual access to markets, delivery of similar, or comparable, access rights degrees to the ones presently available (Dhingra, Ottaviano and Sampson 2015).

As outlined in the European Union TCRs and alternative to passporting, UK should prefer a deal that looks at the existing third country regime (TCRs) of the EU alongside the provision of the equivalence regulation. This should culminate in a solution that allows the whole UK-situated financial service sector cross-border access to the European Union-markets after the Brexit (Hunt and Wheeler 2017). The UK must ensure that these regimes remain sufficiently robust and sustainable. The UK government must stand firm in its pursuit of the bespoke strategy to secure the access. This is because the existing alternatives to passporting as well as TCRs remain not only limited but also substantially less efficient than the present bespoke arrangement (Garcia-Herrero and Xu 2016).

Continuity and regulatory equivalence

There is a need for the UK to agree with the EU on the transitional arrangement as fast as feasible to make sure the industry can continue providing services to customers. This is because the UK remains the leading international financial center and hence the bespoke approach will ensure benefits to both UK and EU as it will guarantee the ability of UK to act as a stronger financial hub in Europe. The UK government has to negotiate an aspiring bespoke deal which preserves the highest access levels for the United Kingdom to European Union and from EU to UK.

From the examination, it is precise that the UK-EU association anchored on the prevailing TCRs as well as regulatory equivalence is never a feasible deal for the entire financial service sector (Onaran 2017). This is because the TCRs remain restrained in converge as well as indeterminate in respective availability, and extremely irregular. Thus, a bespoke approach coupled with sensible protection is the magic to stop fragmenting financial markets as well as guaranteeing the continuity of the services for companies as well as customers in the United Kingdom and crossways European Union. 

The United Kingdom must know very well that it has automatically turned into a 3^rd country after Brexit. Thus except an alternative bespoke arrangement is agreed, the United Kingdom would subsequently be depending on securing access under the European Union TCRs for the maintenance of its European Union’s access for the financial services. Therefore, the paper has examined the procedures engaged and recognized the openings in, alongside the constraints of TCR regimes (Walker 2016).

The insights from this paper points towards the bespoke arrangement that must be passed to the policymakers of the UK to insist on pushing for the bespoke approach to favor the business perspective on Brexit. This deal should settle on the bespoke strategy which sets up mutual access rights as this would benefit both the UK and the EU by securing the financial services’ sector continuity (Ries et al. 2017). There is a need for the UK and EU to achieve a political will to push the bespoke arrangement to thrive. 

Provided the limited coverage, the availability uncertainty and absence of crucial safeguards linked to them, the European Union’s present third country regimes cannot offer a lasting, sustainable solution for the United Kingdom-based industry in overall to access the European Union markets after the Brexit. The examination has revealed that present alternatives to TCRs and passporting for the United Kingdom-based financial services companies remain subject to constraints or stay substantially less efficient as compared to the current arrangements (Hix 2016). Thus, a mutual access deal should be put in place as a share of the bespoke deal with the mutual market access being accorded based on respective regimes are acknowledged as being widely consistent.

However, the United Kingdom must evade attempting to have access right which is tied to the existing notion of EU’s equivalence. The access to rights within the mutual access arrangement must further seek to cover wider scope as possible to match the activities as presently covered within the passporting regime (Johnson 2017). The bespoke arrangement has to include rigorous or robust procedures and processes that guarantee legal certainty.

Bespoke approach for the financial services sector

The UK should also make sure that the deal is that which ensure that the transition into the novel arrangement permits continuous access to the services and products for the companies as well as consumers or customers (Party 2017). The arrangement must further be designed in a manner that preserves the continuity of the UK-based firms’ operation and regulated at the level of EU. Once the UK and EU have agreed on the mutual access criteria, both parties must instantly seek mutual recognition that the other party is meeting appropriate criteria hinged on their respective regimes that match the Brexit. The regulatory collaboration, as well as cooperation between the corresponding regulatory authorities, must be secured. A mutual access deal needs to be employed by the United Kingdom as the foundation for its association with other third countries ongoing. This will offer the EU a novel means of working with all third countries. 

Everyone is worried about regulatory equivalence. “Passporting” and “regulatory equivalence” remains one of the most crucial matters for the City in the negotiation about Brexit. However, few people in the political arena comprehend the two phrases as matters currently stand. They neither understand what the significant negotiating issues are/are not. Hence, they remain ill-positioned to provide the contribution which politics needs to make to the deliberations (Sabin 2017).

Passporting is the phrase utilized when referring to the process by which a UK-authorized financial service company like insurers, banks or asset management firm are entitled to provide its services like delivering insurance product or offering a loan, or managing certain assets in other European Union or European Economic Area (EEA) the Member States. Passporting comes in two forms:

Branch Passporting: One encompasses the UK company setting up its branch in the other Member State (apparently, much less sophisticated and costly than setting up an entire novel company or subsidiary in the other Member States) and undertaking the real engagement with customers or clients from such a branch.

Services Passporting: This encompasses the engagement with clients or customers straight from the firm in the UK.

Until lately, companies which were never in the EEA like Chinese and US firms have no right to passporting or anything close to it. If they such firms wanted to sell their respective services to those firms and customers/consumers in European Union, they had to establish a subsidiary in the Member States. This is, nevertheless, altering. Many of the EU’s more latest main financial services directives as well as regulations have ushered in the principles that companies can offer their corresponding services in the EU, either straight from their home nations, or through the corresponding branches, if their home nation regulations remains deemed to have “regulatory equivalence” with those of the EU-that is deemed by the EU to have regulation equivalent, in the appropriate respect, to the own rules of the EU.

A single most key issue to grasp about the regulatory equivalence is that the existing regulatory equivalence framework of the EU is inapplicable to an array of wholesale financial services as well as financial markets operations/activities which the United Kingdom is a powerful global participant in, however, inapplicable to all kinds of financial services. Mainly, deposit-taking as well as several other retain banking undertakings lack present equivalence framework, implying there are no means by which the non-EU-oriented deposit-taking bank can be deemed to be subject to the equivalent regulation to that in the European Union and, hence, entitled to sell its respective services to the European Union client/consumers (Oliver 2016).

Transitional arrangement and mutual access

This implies that a single most critical dimension of the Brexit negotiation must concern whether the United Kingdom banks shall retain their present deposit-taking as well as additional retail undertakings passport, and, if not, whether some novel system of regulatory equivalence will be ushered in for banks.

Where the regulatory equivalence is present, it is never wholly direct that the European Union shall grant the United Kingdom such status, even if the regulation of the UK remains similar to that of the European Union. The rationale for this is that regulatory equivalence determinations have intensely been political to this end, with Switzerland particularly being denied it, in some areas, clearly due to its citizens rejecting free movements of individuals.

Where this challenge is overridden, there are auditing matters for Brexit deal negotiation. However, it is critical to remain precise what is as well as is not a prospective challenge here (Matthews 2017). As currently structured, a regulatory equivalence determination might be in principle, withdrawn by the European Union at comparatively short notice. The financial service companies planning their corresponding activities, or even those negotiating particular deals, could become nervous about the treatment of UK as truly equivalent where they imagine there stood a real risk of equivalence vanishing in a few days or months (Joseph 2017).

The EU and the US deal with through setting up structures for regulatory engagement so that they are aware of how the future regulations are likely to evolve and subsequently notice of any possible withdrawal of the regulatory equivalence can be accorded. The UE and UK might need to set up identical regulatory engagement structures as this is workable for the business world/perspective.

In the case of the United Kingdom, this would likely, in many occasion, be increasingly a theoretical matter than a practical issue. The United Kingdom regulations incline towards, “super-equivalent” to the European Union’s anyway. Put differently, where the United Kingdom might wish its regulation to differ from that in the European Union; it would qualify still as “equivalent” in the appropriate dimensions since the variations would make the rules of the United Kingdom even firmer than those of the European Union (Livermore and Clarkson 2017). Hence, the concern that the United Kingdom could battle to maintain equivalence might often be an overstatement. If this holds, then the same equivalence regulation between EU and UK would be a plus from the business viewpoint (Swan 2016).

However, the broader matter is that where the United Kingdom is to maintain the regulatory equivalence with the European Union regulation that implies the Brexit deal must match EU regulation that the UK has never had a vote to design so that the United Kingdom’s impact might increasingly decline. This remains a two-fold confusing: In the first case, much European Union regulation is the application, into the law of EU, of the regulation design at the international regulatory forum like IOSCO and Basel.

For instance, the critical EU regulations for the capital alongside liquidity of banks, usually known collaboratively as the “Fourth Capital Requirement Directive” or the “CRD4” which are in a nutshell a copy-out into the rules of the “Basel III” international requirements. The UK and the US would be the influential primary members of the international rule-setting agencies and might have their say in designing the regulations at that point. This would be a good deal regarding business as the UE would instead implement UK-set rules of EU-set rules (Dhingra and Sampson 2016).    

Challenges with existing alternatives

The best Brexit deal should also favor UK since it is too large a participant in the financial services within Europe for the Union to design its financial regulations without checking with UK’s acceptability. The transition process has to be looked too. Thus, from this knowledge, it is apparent that the best deal will be derived when the regulatory equivalence becomes an alternative concerning crucial wholesale activities which are substantial for the United Kingdom. It will provide the option to the present passporting rules where there is no particular deal to retain the UK’s rules (Dhingra and Sampson 2016).

The deal should be one that is aware that the regulatory equivalence is never automatic and that the existing ones are politicized. There is a need to set the equivalence framework for retail activities of the banks. Also, the deal with being a good if once the regulatory equivalence is ushered, it is one which is relatively direct straightforward for the United Kingdom to maintain (Busher 2017). The regulatory equivalence deal should also be that which ensures that the UK is never compelled to accept financial services rules set by the European Union that it never took part in designing.

Conclusion

To sum up, this paper has demonstrated that the best approach for the business perspective is for the UK to pursue bespoke arrangement. It has recognized the significance of the passporting and the regulatory equivalence as some of the critical issues that must inform the UK in its negotiations for a deal (Bronk 2016). It is the position held in this paper that, not only does UK stands to benefit from the bespoke arrangement, but also the EU and the rest of the world. Thus, this paper is summed up with a call to action for both parties not to go the negotiation with the politicized vied of the bespoke arrangement, but to allow for sober negotiations for the greater good of both UK and EU. 

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