UK, EU reach agreement

London: Britain and the European Union have reached a joint post-Brexit agreement on the regulation of financial services, the UK finance ministry announced on Friday, months after a wider trade deal was inked.

The memorandum of understanding, which is still to be signed, will "create the framework for voluntary regulatory cooperation" and establish a regulatory forum which will "serve as a platform to facilitate dialogue on financial services issues".

While the particulars of the agreement have not yet been released, the full text of the memorandum should be published once it is signed before an end of March deadline set by the UK and the EU.

London and Brussels reached a last-gasp free trade agreement on December 24, just days before Britain was due to leave Europe´s single market and customs union on January 1. But the culmination of months of tense talks saw both sides agree to push back a decision on the finance sector, leaving it in limbo.

The City does not expect an ambitious agreement between the two sides, given the importance of the financial services sector to the British economy -- about seven percent of GDP and 10 percent of the country´s tax revenues amounting to £76 billion.

The memorandum is also not anticipated to address the crucial issue of equivalence, which allows London-based firms to operate on the European continent.

For equivalence to be agreed, it has to be granted in 40 separate areas of activity and these can easily be revoked. For the time being, the EU has only granted two to Britain, while London has made 17. One of these, for example, allows European investors to use British clearing houses and another concerns securities deposits.

The loss of the European Economic Area (EEA) cross-border financial passport, which allowed investors to offer their services from London, has started to have an effect on the UK finance sector.