London will no longer be the “gateway to Europe” after it leaves the EU’s single market, a top German banking regulator warned, reports Politico.
Even if banking rules could be made “equivalent” between the U.K. and the rest of the bloc, the arrangement would still be “miles away from access to the single market,” said Andreas Dombret, an executive board member of Germany’s central bank. He made the comments at a private meeting of businesses and banks in Frankfurt this week, according to a BBC report published Friday.
The Bundesbank executive said he did not support a “confrontational approach” to future U.K.-EU relations and argued Britain should be allowed a “transition period” to alleviate financial risks.
But there was “intense uncertainty” about how negotiations would play out, he said, predicting London was unlikely to remain the financial services capital of the EU.
Brexit, he said, was an example of increasing “re-nationalization” in Europe and would have damaging effects for the Continent as a whole.
Dombret warned against a “race to the bottom,” saying slashing taxes and relaxing financial regulations to attract investment — as London has suggested it might do — would undermine the trend toward internationally agreed standards.
“We should not forget that strictly supervised and well-capitalized financial systems are the most successful ones in the long run,” he said. “The EU will not engage in a regulatory race to the bottom.”
The U.K.’s euro-denominated clearing should move back to the Continent, Dombret added. The European Court of Justice acts as an arbiter in the process and Britain has made it clear it does not want to be bound by ECJ judgements post-Brexit.