The U.K. government will not pursue a passporting regime for financial services in its negotiations to leave the European Union.
Prime Minister Theresa May said in a speech Friday that Chancellor of the Exchequer Philip Hammond next week will set out "how financial services can and should be part of a deep and comprehensive partnership. We're not looking for passporting, because we understand this is intrinsic to the single market, of which we would no longer be a member. It would also require us to be subject to a single rulebook, over which we would have no control," Ms. May said.
Under EU regulation, the passporting regime allows firms in member states to provide financial services across the EU under a common set of rules. There are passporting provisions in European laws such as the Alternative Investment Fund Managers Directive.
Ms. May addressed a number of industries, but said: "There are two areas which have never been covered in a free-trade agreement in any meaningful way before — broadcasting and, despite the EU's own best efforts in the transatlantic trade and investment partnership, financial services. But we have some ideas for how we can do this, and it's in all of our interests to explore these."
She outlined the importance of the U.K. to financial stability globally, adding that the country "has responsibility for the financial stability of the world's most significant center, and our taxpayers bear the risk. So it would be unrealistic for us to implement new EU legislation automatically and in its entirety."
Ms. May said U.K.-based banks underwrite about half of the debt and equity issued by EU companies, and provided more than £1.1 trillion ($1.5 trillion) of cross-border lending to the rest of the EU in 2015. "This is a clear example of where only looking at precedent would hurt both the U.K. and EU economies," she said.
Despite ruling out passporting, Ms. May said: "As in other areas of future economic partnership, our goal should be to establish the ability to access each other's markets, based on the U.K. and EU maintaining the same regulatory outcomes over time, with a mechanism for determining proportionate consequences where they are not maintained."
She added that, given the "highly regulated nature of financial services, and our shared desire to manage financial stability risks, we would need a collaborative objective framework that is reciprocal, mutually agreed and permanent and therefore reliable for businesses."