Brexit has begun to create a shift of financial regulation within Europe. With the resignation of Britain’s EU Commissioner in charge of financial services, Jonathan Hill, Britain is seeing its influence within Europe dissolve. During an interview with the FT, Lord Hill discussed the shift of power that will affect British financial institutions and the European Union. According to his analysis, whatever the agreement between Britain and the EU post Brexit, British banks and financial institutions will not be able to avoid a shift in regulation focused on the priorities of the 27 EU member states. For British banks and financial institutions to continue to have lucrative “passport” rights the UK would almost certainly have to sign up for the single market and according to Lord Hill that may be impossible: “Most approaches that offer access come with free movement of people and I can’t see that flying given the weight of immigration as an issue in the referendum debate”. Even if the UK signs up for the single market, some senior EU officials believe that countries led by France will block any future form of privileged Eurozone market passport.
The resignation of Lord Hill also creates concerns of a potential abandonment of the capital markets union. Lord Hill suggested that the capital markets union may continue, but it will now take a Eurozone-centred shape: “The voices that would be present at the table without Britain there — the voice of the French financial services industry, German industry, Dutch, Irish — will clearly be heard,” said Lord Hill.
Guillaume Prache, managing director of BETTER FINANCE has been quoted on the impact that the resignation of Lord Hill and Brexit will have on the implementation of the capital markets union: “A Brexit can only hurt the CMU initiative which is already lacking ambition." He added: “This lack of any significant capital market integration still deprives European savers and investors from any economies of scale and improved competition benefits. A Brexit can only push further away again such a fundamental and basic achievement of any international trade union”.