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OECD advises pragmatic approach to City after Brexit

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The EU has ‘ample room’ to take a ‘pragmatic approach’ to trade with the City of London after Brexit, states the OECD in its 2017 Business and Finance Outlook. London is a ‘key agglomeration’, taking many decades to build up, which brings economies of scale via trade in financial services.

‘Erecting new barriers to financial services in the post-Brexit environment will not be in the collective interest of the global economy’, the report argues. As far as OECD countries are concerned, OECD codes of liberalisation ‘should present no legal barriers’ to operations following Brexit. Specifically:

  • the EU passport facility for financial services is not treated as a ‘preferential treatment’, but rather an arrangement which recognises a level of regulatory and prudential equivalence; and
  • no breach of the ‘most favoured nation’ principle results from EU directives allowing the European Commission to take ‘equivalence decisions’ by which third country service providers can be entitled to access European financial services markets without incorporation.

The report says that: ‘unless UK and EU financial services regimes diverge significantly after Brexit, it can arguably be expected that the UK would benefit from the sort of selective recognition arrangements provided for by the Codes’. Recognition of EU financial service providers by the UK authorities as meeting UK standards ‘is also to be expected’, the OECD adds.

The OECD Business and Finance Outlook (see is an annual publication presenting data and analysis on factors that might affect tomorrow’s world of business, finance and investment. 

Issue: 1356
Categories: News , International taxes