The UK's chancellor told business leaders on Thursday the equivalence deal with the EU for financial services giving City regulation parity with Europe has not happened.
In his Mansion House speech in London Rishi Sunak said: "Our ambition has been to reach a comprehensive set of mutual decisions on financial services equivalence. That has not happened.
"Now we are moving forward. Continuing to cooperate on questions of global finances, but each as a sovereign jurisdiction with our own priorities."
The City was largely excluded from the Brexit trade deal with the EU, and had been pushing for an equivalence deal so they could get wide-ranging access to the bloc. Equivalence refers to a decision by one state to recognise another state’s legal requirements for regulating a good or service, even though they may not be exactly the same. This means that businesses and traders need to comply with only one set of rules, mutually recognised.
Sunak said the UK will use "our new freedoms to follow a distinctive approach founded on UK law, protected by independent UK regulators, designed to strengthen UK markets". However, he insisted the EU would “never have cause” to deny the UK access because of poor regulatory standards.
In his speech on the future of financial services, the chancellor reiterated the government's focus on economic and financial diplomacy.
"The UK has an abiding interest in a prosperous and productive Europe. We have deep shared values and a long history of cooperation. And we will strengthen those ties," Sunak said.
He added the UK already has one of the world’s "most robust regulatory regimes" for central counterparties, and said that the plan is not to weaken but strengthen that regime.
"I see no reason of substance why the UK cannot or should not continue to provide clearing services for countries in the EU and around the world."
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The chancellor made special mention of the United States calling it the UK's most important bilateral partner.
"Our principles and values will also underpin our relationship with the United States. The US is already our biggest market, with the UK exporting $28bn [£20bn] of financial services every year.
"Our ambition is to deepen regulatory cooperation even further, with our closest ally."
He said the UK intends to implement a sweeping set of reforms over the next few years to "sharpen competitive advantage in financial services."
He said that also meant reforming capital markets regulation and implementing the recommendations in Lord Hill’s listings review, including a fundamental review of the prospectus regime, and reforming the prudential regulation of the insurance sector.
The Treasury had commissioned a review of the London listings regime in November with an aim to make the UK more attractive to firms over major rivals in US and Europe.
Lord Hill, a former EU commissioner, submitted his recommendations in early March and they were widely welcomed by the City. The recommendations proposed companies should be allowed to sell so-called "dual-class" shares in the premium listing segment of the London Stock Exchange.
The move would allow company founders to keep control over their companies by giving them deciding votes on big decisions such as mergers and takeovers.
The report also recommended reducing the proportion of a company's shares that must be publicly traded from 25% to 15%, and that the chancellor should report to Parliament on the state of the City of London every year.