"Mutual Recognition" for Financial Rules desired by UK after Brexit
The International Regulatory Strategy Group has proposed a regulatory system built on "mutual recognition" between the UK and EU post-Brexit with the aim of maintaining European access for the City of London. At the point of departure, the UK and EU will operate to an aligned regulatory and supervisory regime. A mechanism has been proposed to monitor any divergence of rules thereafter with a dispute resolution mechanism to resolve any divergence upon which easy alignment couldn't be agreed (such as higher capital requirements).
While the proposal is expected to be favoured by the British government, many believe that Brussels will delay any agreement for the Financial Services sector until later in the exit process given the importance of maintaining access for London post-Brexit. The EU has been clear in its stance that the UK will not be able to negotiate special access to the single market for financial services once it leaves the EU however commentators cite the EU's free trade deal with Canada, which includes regulatory co-operation on financial services, as a model for post-Brexit Britain.
Theresa May however has said that the UK will not emulate a Norwegian or Canadian agreement and instead will negotiate a "bespoke deal" for the UK. May is keen to prioritise financial services in Brexit negotiations and in January 2018, she told City of London executives that financial services would be at the heart of a new trade deal with the EU.