Blow for IDA as Moody's says City of London won't be locked out of the European Union
Global banks based in the City of London are likely to keep their coveted access to the European Union's single market after Brexit even if they lose full passporting rights, according to Moody's Investors Service.
If true it will be a blow to the IDA's push to attract banks, insurers and other financial firms away from the UK to set up in Ireland, where access to the EU is guaranteed.
Moody's made its assessment based on the fact that most EU financial-services law recognises that some non-EU countries have rules and oversights as tough as its own, the credit-ratings company said in a report yesterday.
While the UK leaving the single market would increase costs for the banks, it would likely be "manageable", Moody's said.
"In particular, we consider that the third-country equivalence provisions contained within the incoming MiFID II EU directive may provide firms with an alternative means of accessing the single market," said Simon Ainsworth, senior vice president at Moody's.
"The complexity of (quickly) unwinding the status quo and a desire to minimise the initial impact on European domiciled banks will likely lead to the preservation of most cross-border rights to undertake business."
The UK's Chancellor of the Exchequer, Philip Hammond, is said to be prepared to accept that Britain may have to give up membership of the single market to achieve the immigration restrictions that voters have demanded.
UK-based banks, including the European headquarters of US and other global firms, are pressing him to strike an interim agreement with the EU that would preserve their ability to provide services. (Bloomberg)