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EU financial services chief will cut off City of London if necessary

BRUSSELS/LONDON (Reuters) - The European Union is ready for every type of Brexit, including granting no further EU access to Britain’s financial sector, the bloc’s candidate for financial services chief said in a document seen by Reuters.

A man wearing a protective mask walks past a boundary marker for the City of London, amid the outbreak of the coronavirus disease (COVID-19), in London, Britain August 24, 2020. REUTERS/John Sibley

After Dec. 31, when a transition deal ahead of a full-blown Brexit ends, financial services companies in Britain will have to access the EU via its “equivalence” system.

The EU has already granted temporary access to UK clearing houses from January under this regulatory regime.

Mairead McGuinness, the EU’s financial services commissioner designate, said from January there would be significant changes in financial services between Britain and the EU, regardless of whether UK-EU talks that continue this week reach on a free trade agreement.

“As tensions in the overall EU-UK negotiations have increased, we continue to prepare for all possible scenarios, including a no further equivalences scenario,” McGuinness said in written answers to EU lawmakers ahead of her confirmation hearing in the European Parliament on Friday.

“Market participants are urged to take all necessary steps by the end of 2020 to prepare for all possible outcomes, she said.

“It will not be business as usual as, in any case, UK financial services firms will lose the benefit of the financial services passport.”

The EU is currently undertaking an “unprecedented” exercise of parallel assessments of many equivalence areas with respect to Britain, said McGuinness, a veteran Irish centre-right member of the European Parliament.

But the UK’s stated intention to diverge from some EU rules “will naturally have consequences” for those assessments, she also said in the written answers.

McGuinness said any equivalence would come with strict conditions.

“Should equivalence be granted in a particular area, it will need to be accompanied by ... commitments not to deviate from the EU framework for the period covered by the equivalence decision,” she said.

The EU will continue to champion open trade but will not be naive about defending its own interests, she said.

Reporting by Francesco Guarascio in Brussels and Huw Jones in London, editing by Carolyn Cohn and Jane Merriman

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