scispace - formally typeset
Search or ask a question
Journal ArticleDOI

Financial services, the EU, and Brexit: an uncertain future for the city?

01 Jul 2016-German Law Journal (German Law Journal)-Vol. 17, pp 75-82
TL;DR: The financial services industry is one of the most heavily regulated sectors of the modern economy, reflecting the need to protect the public interest in a strong and stable financial sector as mentioned in this paper. But the consequences of the extraction of the UK from EU financial governance are likely to be disruptive in nature and long term in duration.
Abstract: The financial services industry is of central importance to the UK economy. It represents some 7% of GDP. It also generates major exports for the UK - in the region of one-third of UK financial services are exported to the EU. News reports in the immediate aftermath of the referendum result included the sharp drop in banking stocks; the overtures being made to attract UK financial business away from the City to other EU centres; and plans by leading financial institutions to move some operations away from the City. Vivid illustrations all of the importance of the Brexit vote for the City and the UK financial services industry. The financial services sector is one of the most heavily regulated sectors of the modern economy, reflecting the need to protect the public interest in a strong and stable financial sector. The EU has, up to now, provided the framework within which UK regulation of the financial sector has been designed, applied, and supervised. The nature of the UK’s relationship with the EU following its exit from the EU has yet to be determined. But the consequences of the extraction of the UK from EU financial governance are likely to be disruptive in nature and long term in duration. This short note highlights some of the many implications from a regulatory perspective.

Summary (2 min read)

The UK and the International Financial Market

  • The arguments posed in favour of a ‘Leave’ vote often referenced the possibility of lower levels of financial regulation.
  • On exit from the EU, the UK’s ability to influence and impose its preferences on these international standards will be severely diminished.
  • At present, the UK has four channels through which it can protect its interests in financial regulation.
  • As part of the EU’s crisis-era institutional governance settlement and on which all the EU Member States are represented, play a key role in implementing international standards - the European Banking Authority, for example, has been a major institutional player in the design of the detailed technical rules required to implement CRD IV/CRR/Basel III.
  • The removal by the US of the costly ‘reconciliation’ requirement imposed on EU firms (to reconcile their financial accounts to US GAAP – the US accounting standard) was agreed because the EU adopted, as a bloc, International Financial Reporting Standards: the US agreed accordingly to accept accounts following International Financial Reporting Standards.

The UK and the Single Market

  • On an exit from the EU, the financial services industry will no longer have access to the massive single market in financial services on the basis of current arrangements.
  • The passport allows a firm to provide services cross-border and to use branches without being subject to duplicate regulation or supervision.
  • The financial crisis led to a political and institutional consensus in the EU on the need for a harmonized single rulebook that would protect the single market against cross-border risk transmission, support pan-EU financial stability, facilitate crossborder market access – and also meet the EU’s G20 commitments with respect to financial regulation reform.
  • In addition, much of the single rulebook, with which the UK would have to show equivalence, takes the form of highly detailed technical rules which are proposed by the European Supervisory Authorities.
  • Operating outside the EU Treaties and their guarantees, the UK would have little protection against a Financial Union which sought to repatriate certain euro-denominated trading through regulatory means.

The UK and the Domestic Market

  • Finally, for those UK firms that do not trade with the EU, an exit from the EU will also generate costs and uncertainties.
  • The case was decided on an issue relating to the scope of the ECB’s powers.
  • Report by Jean-Claude Juncker, in close cooperation with Donald Tusk, Jeroen Dijsselbloem, Mario Draghi, and Martin Schulz (June 2015).
  • During this replacement process, and aside from any consideration of equivalence-related obligations which may arise, the UK will also have to decide which of the obligations it has implemented through Directives it will keep ‘on the books’.
  • The unpicking from the macro EU financial regulation order, and in a manner which brings minimum disruption to the financial services sector and its users, of a coherent and stable micro UK financial regulation order - which protects investors and supports financial stability - is a task which confounds the search for a metaphor which illustrates the immense complexity engaged.

Did you find this useful? Give us your feedback

Content maybe subject to copyright    Report

Niamh Moloney
Financial services, the EU, and Brexit: an
uncertain future for the city?
Article (Accepted version)
(Refereed)
Original citation: Moloney, Niamh (2016) Financial services, the EU, and Brexit: an uncertain
future for the city? German Law Journal, 17 . pp. 75-82. ISSN 2071-8322
© 2016 German Law Journal
This version available at: http://eprints.lse.ac.uk/67292/
Available in LSE Research Online: July 2016
LSE has developed LSE Research Online so that users may access research output of the School.
Copyright © and Moral Rights for the papers on this site are retained by the individual authors
and/or other copyright owners. Users may download and/or print one copy of any article(s) in LSE
Research Online to facilitate their private study or for non-commercial research. You may not
engage in further distribution of the material or use it for any profit-making activities or any
commercial gain. You may freely distribute the URL (http://eprints.lse.ac.uk) of the LSE Research
Online website.
This document is the author’s final accepted version of the journal article. There may be differences
between this version and the published version. You are advised to consult the publisher’s version
if you wish to cite from it.

Financial Services, the EU, and Brexit: An Uncertain Future for the City?
Niamh Moloney
London School of Economics and Political Science, Law Department
[N.Moloney@lse.ac.uk]
The financial services industry is of central importance to the UK economy. It represents some 7% of GDP.
It also generates major exports for the UK - in the region of one-third of UK financial services are exported
to the EU.
1
News reports in the immediate aftermath of the referendum result included the sharp drop in
banking stocks; the overtures being made to attract UK financial business away from the City to other EU
centres; and plans by leading financial institutions to move some operations away from the City. Vivid
illustrations all of the importance of the Brexit vote for the City and the UK financial services industry.
The financial services sector is one of the most heavily regulated sectors of the modern economy,
reflecting the need to protect the public interest in a strong and stable financial sector. The EU has, up to
now, provided the framework within which UK regulation of the financial sector has been designed,
applied, and supervised.
The nature of the UK’s relationship with the EU following its exit from the EU has yet to be determined.
But the consequences of the extraction of the UK from EU financial governance are likely to be disruptive
in nature and long term in duration. This short note highlights some of the many implications from a
regulatory perspective.
The UK and the International Financial Market
The arguments posed in favour of a ‘Leave’ vote often referenced the possibility of lower levels of
financial regulation. The UK’s exit from the EU is very unlikely to bring any significant change to the nature
of UK financial regulation. This is because financial regulation is global in nature. Much of it derives from
the standards set by the International Standard Setting Bodies (ISSBs) - for example, the Financial Stability
Board, the Basel Committee on Banking Supervision, the International Organization of Securities
Commissions, and the International Association of Insurance Supervisors - and is shaped politically by the
G20.
On exit from the EU, the UK’s ability to influence and impose its preferences on these international
standards will be severely diminished. At present, the UK has four channels through which it can protect
its interests in financial regulation. First, as a member of the major ISSBs, it can directly advocate for UK
interests as it did during the Basel Committee negotiations on the pivotal crisis-era ‘Basel III’ banking
regulation reforms. Second, the EU acts as collective bloc on these ISSBs where a common position can be
constructed (the Commission typically sits on the ISSBs, whether directly or in an observer capacity) -
collective EU interests also shaped the Basel III reforms. Third, as international standards are
implemented in the EU through the adoption of related EU Directives and Regulations, the UK, through
the legislative process, can protect UK interests by influencing how Member States implement the
standards. The adoption of the behemoth Capital Requirements Directive IV/Capital Requirements
Regulation 2013 (CRD IV/CRR) which acts as the EU’s banking rulebook and which implements Basel III -
saw the UK achieve a number of negotiating successes designed to ensure the implementation process
would not undermine UK interests. Finally, the EU’s European Supervisory Authorities, established in 2011
1
HM Treasury, The Long Term Economic Impact of EU Membership and the Alternatives (April 2016).

as part of the EU’s crisis-era institutional governance settlement and on which all the EU Member States
are represented, play a key role in implementing international standards - the European Banking
Authority, for example, has been a major institutional player in the design of the detailed technical rules
required to implement CRD IV/CRR/Basel III. On an EU exit, the UK will lose three of these four channels
for influence. But it will remain obliged to implement internationals standards.
Other international consequences follow. As has been well charted in the literature, the EU has, in the
wake of the financial crisis, become one of the ‘great powers’ in international financial regulation. Part of
the EU’s related regulatory capacity (or ability to shape outcomes) internationally derives from the EU’s
ability to impose ‘equivalence’ requirements on third country access to the single market in financial
services. The UK will no longer benefit from this regulatory capacity which has been used by the EU to
negotiate access by EU firms to third country markets. For example, the removal by the US of the costly
‘reconciliation’ requirement imposed on EU firms (to reconcile their financial accounts to US GAAP the
US accounting standard) was agreed because the EU adopted, as a bloc, International Financial Reporting
Standards: the US agreed accordingly to accept accounts following International Financial Reporting
Standards. A technical issue, certainly, but one of great practical significance for the many large UK firms
listed on US stock exchanges.
The UK and the Single Market
On an exit from the EU, the financial services industry will no longer have access to the massive single
market in financial services on the basis of current arrangements. There is no clarity at the moment on the
nature of the UK’s potential access arrangements. But a number of comments can be made with a
reasonable degree of certainty.
The financial services ‘passport’ through which UK financial institutions access the single market - will
not be available in its current form. The passport is based on the ‘home’ country of a financial institution
(where that firm is registered) supervising that firm and applying the EU’s ‘single rulebook.’ The passport
allows a firm to provide services cross-border and to use branches without being subject to duplicate
regulation or supervision. For this reason, international banks and financial institutions have established
subsidiaries in the UK so that, as UK home-regulated firms, they can access the single market and avoid
the complexities, opacities, and uncertainties of third country access arrangements. The passport
depends on mutual trust between national supervisors and is, accordingly, dependent on harmonized
regulation and on coordinated supervision of financial firms. The financial crisis led to a political and
institutional consensus in the EU on the need for a harmonized single rulebook that would protect the
single market against cross-border risk transmission, support pan-EU financial stability, facilitate cross-
border market access and also meet the EU’s G20 commitments with respect to financial regulation
reform. This single rulebook is of massive scale and depth, being composed of ‘level 1’ legislative rules,
‘level 2’ technical delegated rules adopted by the Commission, and ‘level 3’ soft guidelines and other
measures adopted by the European Supervisory Authorities. It runs to thousands of pages of text and its
adoption has required a monumental effort by the EU’s rule-making institutions, by regulated actors, and
by a wide range of stakeholders. The UK has implemented most of these rules and will be required to
continue with the implementation process until it leaves the EU. In all likelihood most if not all of these
rules would have been adopted by the UK without an EU imperative, as they reflect the G20’s reform
agenda, the requirements imposed by the international standard setters, and the changed post-crisis
global consensus on how regulation should be designed and applied.
On an exit, the UK will no longer have access to the financial services passport. Under the European
Economic Area/Norway model, it would have access to the single market but would be required to apply
the single rulebook - and would not be involved in the negotiations on and the development of this
rulebook. This matters as the single rulebook is highly dynamic. For example, the EU’s current major
regulatory project for financial services is Capital Markets Union (CMU), which was launched by the
Commission in September 2015. CMU is a liberalization project. It is designed to deepen EU capital

markets, strengthen market-based finance, and reduce the current dependence on bank financing in
order to support pan-EU growth. Its importance to the City the major capital market centre in the EU -
was immense. On exit, and under an EEA model, the UK will not be able to influence CMU-related
negotiations, despite their acute importance for the City. The UK will also lose the ability to shape
refinements to the single rulebook which could protect its interests. EU financial regulation is currently
being reviewed - the massive crisis-era single rulebook contains a number of automatic ‘review clauses’
which are now being activated. On exit, the UK will be outside this review process and unable to influence
it to protect UK interests. To take one example, the famous ‘bankers’ pay bonus cap’, which was fiercely
resisted by the UK, is now being reconsidered, particularly with respect to whether new rules governing
the proportionality with which the cap applies are required. The UK will have no voice in these discussions
should they not be completed prior to a UK exit. And in the interim, it is difficult to see how the UK will be
able to exert any form of influence in ongoing Council negotiations on financial regulation not least as a
euro area qualified majority is now in place in the Council and there will be few incentives for euro area
Member States to coalesce with the UK: the interests of those Member States with large financial centres
- notably France, Germany, the Netherlands, Luxembourg, and Ireland - can be expected to dominate.
Previously, the UK has been an influential and effective influence on financial regulation negotiations. For
example, many of the exemptions and calibrations contained in the massive Markets in Financial
Instruments Directive II/Markets in Financial Instruments Regulation 2014 (MiFID II/MiFIR), which will
govern EU investment firms, markets, and infrastructures from 2017, and which are designed to ensure
the new rules are calibrated to reflect different market sectors, are a product of UK negotiation successes.
Beyond the EEA model, any other access model would, given the highly regulated nature of financial
services (both in the EU and globally) involve some sort of equivalence’ arrangement, with the UK seeking
access as a ‘third country’ to the single market. The rules governing third country equivalence and related
access to the single financial market are different across different EU financial regulation measures.
Sometimes the equivalence decision is held at EU level (with the Commission), more often it is held at
Member State level. Equivalence decisions are not automatic and it is hard to see how any equivalence
negotiations with the UK whether by the EU or individual Member States - would not become highly
political given how competitive the global financial market is. As the UK has adopted the single rulebook,
and as it would likely keep it if it was seeking some form of single market access, formal regulatory
equivalence would not pose a major problem. But significant challenges for the UK could be generated by
any new rules which the UK would be required to follow, or at least to adopt in such a way that the
equivalence assessment was met, and which it had not been able to influence. New EU rules are on the
horizon. These include rules governing investment fund regulation which would be of significant
importance to the UK asset management sector. In addition, much of the single rulebook, with which the
UK would have to show equivalence, takes the form of highly detailed technical rules which are proposed
by the European Supervisory Authorities. The UK will not have a seat or vote on these Authorities on
Brexit and will not be able to influence the new technical rules that will be proposed by these Authorities.
But equivalence under current EU financial law is not simply a matter of regulatory equivalence. It also
involves an assessment of supervisory/enforcement equivalence, and here the difficulties could be
considerable given the highly elusive nature of equivalence determinations with respect to supervision
and enforcement. The UK might, for example, come under pressure to adopt a tougher approach to
enforcement or to change its approach to supervision. At present, no such pressure can be applied within
the single market.
Finally, and assuming it was operating outside an EEA arrangement, the UK would lose the EU Treaty
guarantees relating to single market access. At present, the right of UK firms to choose the form in which
they access other Member State markets (whether service provision, branches, or subsidiaries) is
protected as a matter of EU law. This guarantee would no longer be available and UK financial institutions
would accordingly become vulnerable to requirements to, for example, establish costly subsidiaries.
The UK and the Euro Area

It is very unlikely that, politically, the euro area will be neutral or disinterested with respect to the UK
remaining the major centre for euro-denominated trading in the EU (as it currently is). Prior to June 23,
there were significant tensions relating to euro area interests and influence, particularly as the euro area
can now form a qualified majority voting bloc in the Council and so shape EU/single market decision-
making more generally, and as Banking Union has created new incentives and opportunities for euro area
interests to be pursued. The UK’s efforts to minimize the dangers of euro area caucusing and of any
potential discrimination against single market Member States who do not form part of the euro area have
had traction. Notable outcomes include the successful action by the UK against the ECB’s ‘location policy’
for central clearing counterparties a critical part of financial market infrastructure - which the UK
claimed discriminated against non-euro-area central clearing counterparties by requiring euro area
location.
2
Similarly, the ‘double lock’ voting arrangement which applies to the European Banking
Authority’s Board of Supervisors, and which requires a double majority of Banking Union Board members
and of non-Banking-Union Board members, were driven by the UK. Most recently, the February 2016 New
Settlement on the relationship between the UK and the EU was designed to give legal, but more
importantly political, protection to the UK (and the single market) against euro area caucusing risks and
was the European Council’s response to the UK’s call for legally binding principles that safeguarded the
operation of the Union for all 28 Member States and protected the single market.
3
The New Settlement is now null and void. On an exit, and assuming a non-EEA arrangement, the legal
protections against discrimination within the EU on currency grounds, both in the Treaty and in specific
EU financial services measures, will fall away. Even within the EEA, the UK will no longer have a seat or
vote on the European Banking Authority it will have only observer status. The consequences could be
severe for euro-denominated trading and financial services. Location requirements, for example, could
be imposed on the UK’s access, as a third country, to the single market. Such location requirements could
require certain euro-denominated business/trading to be carried out in the euro area. This is a particularly
likely outcome with respect to critical market infrastructures, such as stock exchanges and central clearing
counterparties, in relation to which rescue/resolution responses involving ECB/euro area liquidity support
might be needed. These requirements are all the more likely to follow given the political and institutional
support in some quarters for a more integrated ‘Financial Union,’ based on Banking Union but which
would also include more intense institutional integration with respect to capital markets.
4
Operating
outside the EU Treaties and their guarantees, the UK would have little protection against a Financial
Union which sought to repatriate certain euro-denominated trading through regulatory means. Network
effects may also follow. If euro area business shrinks, the UK market might become less liquid and lose
business more generally.
The UK and the Domestic Market
Finally, for those UK firms that do not trade with the EU, an exit from the EU will also generate costs and
uncertainties. This is because of the changes which will be required to the legal operating environment for
financial services in the UK.
Much of UK financial legislation is in the form of EU Regulations which apply directly in the UK. These
rules will cease to have legal effect on an EU exit. They must be replaced if a regulatory vacuum, in an
area of the economy which demands high levels of regulation if the public interest is to be protected, is to
2
Case T-496/11, European Central Bank v UK. The case was decided on an issue relating to the scope of the ECB’s powers.
3
Decision of the Heads of State or Government Meeting Within the European Council, “Concerning a New Settlement for the United
Kingdom with the European Union,” European Council Meeting, 18 and 19 February 2016 (EUCO 1/16), Annex 1. See N. Moloney,
Capital Markets Union: “Ever Closer Union” For the EU Financial System?, 41 EUROPEAN LAW REVIEW (2016) 307.
4
Completing Europe’s Economic and Monetary Union. Report by Jean-Claude Juncker, in close cooperation with Donald Tusk, Jeroen
Dijsselbloem, Mario Draghi, and Martin Schulz (June 2015).

Citations
More filters
Journal ArticleDOI
TL;DR: In this paper, the authors consider the likely consequences of Brexit for financial services in the UK and propose a transition period of continued EU membership for the UK to continue to rely on regulatory passporting rights.
Abstract: Financial services constitute an important net export for the UK economy, for which the rest of the EU is the largest market. This paper considers the likely consequences of Brexit for this sector. A ‘soft’ Brexit, whereby the UK leaves the EU but remains in the single market, would be a lower-risk option for the City than other Brexit options, because it would enable financial services firms to continue to rely on regulatory passporting rights. Under a ‘hard’ Brexit scenario, where the UK leaves the single market, the UK might in principle be able to benefit from the EU’s third country ‘equivalence’ frameworks for financial services, but these are cumbrous and incomplete alternatives to passporting. UK firms would find it considerably more costly to export to the EU. This would also be a loss to the EU27, because the UK specialises in capital markets services for which the EU, over-reliant on banking, recognises a need. However, much of this ‘UK’ activity is provided by subsidiaries of US-headquartered groups. In the event of hard Brexit, these firms may be able to compete just as effectively from New York as from London. If ‘soft’ Brexit proves politically impossible, it seems highly desirable that the UK push for a transition period of continued EU membership pending at the very least completion of equivalence determinations and more usefully, the conclusion of a suitable bilateral agreement.

40 citations

Journal ArticleDOI
TL;DR: The tweets intended for famous British politicians are analyzed geospatially and their sentiment distribution is visualized and the geospatial sentiment analysis of the whole dataset for “leave” and “remain” tags is plotted on the atlas map.
Abstract: Brexit i.e. “British Exit” is one of the major events in the history of economics and British politics. When EU referendum took place, 52% of votes were in favor of United Kingdom leaving the Europ...

37 citations


Cites background from "Financial services, the EU, and Bre..."

  • ...In the same week of referendum, many researchers from the field of academics and many journalists tried to analyze the reason which lead to this result and have shown many potential implications on various subjects [4], [7], [15]....

    [...]

Journal ArticleDOI
24 Mar 2018-Geoforum
TL;DR: In this article, the authors assess the strategic positioning of private and public actors within two European IFCs (Frankfurt and Paris) in the period following the Brexit vote and argue that existing approaches to financial centre relations should engage with the ways in which political actors shape European financial relations.

23 citations

Journal ArticleDOI
TL;DR: In this article, the authors analyzed the auto-correlations of all European Union (EU) indices and the cross-correlation between the UK stock market and the other EU markets.
Abstract: We analyze the auto-correlations of all European Union (EU) indices and the cross-correlation between the UK stock market and the other EU markets. This analysis took into account the BREXIT referendum, on the 23rd of June 2016 and the entire period was partitioned in two periods, before and after the BREXIT referendum. First of all, we applied the Detrended Fluctuation Analysis method (with the regular and with a sliding windows approach) in order to evaluate market efficiency. In this case, we found that in general the referendum did not change efficiency levels significantly. With the main purpose of measuring the markets interdependence in relation to the UK index, following the referendum, we calculated the Δ ρ D C C A coefficient. Our results point to a decrease in the cross-correlation coefficient ( Δ ρ D C C A 0 ), meaning that the UK is more segmented now, in relation to other EU partners, than in the past. With Δ ρ D C C A it was possible to identify how much the referendum influenced the interdependence, but not the efficiency, of European markets.

21 citations

Journal ArticleDOI
TL;DR: The legal nature and substantive content of the agreements that might be concluded between the UK and the EU if 'Brexit' were to become a reality is discussed in this article, where the authors examine the UK rules on ratification of such international agreements.
Abstract: The dust has not yet settled after the referendum on Britain's relationship with the EU, which took place on 23 June 2016. UK voted to leave the EU by 51.9% to 48.1%, which is a winning margin of almost 1.3 million votes. However, it is not yet clear what ‘Brexit’ means or how it will come about – legally and constitutionally. This article seeks to answer the latter question from the standpoint of UK and EU law. The discussion begins with the domestic process before beginning the initial withdrawal negotiations, which is governed by UK constitutional law. The focus then shifts to the process of withdrawing from the EU, which is set out in Article 50 TEU. This article further examines whether ‘Brexit’ can be stopped once Article 50 has been triggered. The penultimate section of the article looks at the legal nature and substantive content of the agreements that might be concluded between the UK and the EU if ‘Brexit’ were to become a reality. The final section of the article examines the UK rules on ratification of such international agreements.

7 citations

Frequently Asked Questions (13)
Q1. What are the contributions in "Financial services, the eu, and brexit: an uncertain future for the city?" ?

Copyright © and Moral Rights for the papers on this site are retained by the individual authors and/or other copyright owners. You may not engage in further distribution of the material or use it for any profit-making activities or any commercial gain. 

But the consequences of the extraction of the UK from EU financial governance are likely to be disruptive in nature and long term in duration. 

News reports in the immediate aftermath of the referendum result included the sharp drop in banking stocks; the overtures being made to attract UK financial business away from the City to other EU centres; and plans by leading financial institutions to move some operations away from the City. 

At present, the right of UK firms to choose the form in which they access other Member State markets (whether service provision, branches, or subsidiaries) is protected as a matter of EU law. 

the EU acts as collective bloc on these ISSBs where a common position can be constructed (the Commission typically sits on the ISSBs, whether directly or in an observer capacity) - collective EU interests also shaped the Basel III reforms. 

Prior to June 23, there were significant tensions relating to euro area interests and influence, particularly as the euro area can now form a qualified majority voting bloc in the Council and so shape EU/single market decisionmaking more generally, and as Banking Union has created new incentives and opportunities for euro area interests to be pursued. 

For this reason, international banks and financial institutions have established subsidiaries in the UK so that, as UK home-regulated firms, they can access the single market and avoid the complexities, opacities, and uncertainties of third country access arrangements. 

On exit from the EU, the UK’s ability to influence and impose its preferences on these international standards will be severely diminished. 

Notable outcomes include the successful action by the UK against the ECB’s ‘location policy’ for central clearing counterparties – a critical part of financial market infrastructure - which the UK claimed discriminated against non-euro-area central clearing counterparties by requiring euro area location. 

This single rulebook is of massive scale and depth, being composed of ‘level 1’ legislative rules, ‘level 2’ technical delegated rules adopted by the Commission, and ‘level 3’ soft guidelines and other measures adopted by the European Supervisory Authorities. 

Although in the form of soft law, these measures have become part of the regulatory fabric supporting the UK financial sector and protecting the public interest in stable markets, and have also shaped the business and operating models adopted by financial firms. 

To take one example, the famous ‘bankers’ pay bonus cap’, which was fiercely resisted by the UK, is now being reconsidered, particularly with respect to whether new rules governing the proportionality with which the cap applies are required. 

And in the interim, it is difficult to see how the UK will be able to exert any form of influence in ongoing Council negotiations on financial regulation – not least as a euro area qualified majority is now in place in the Council and there will be few incentives for euro area Member States to coalesce with the UK: the interests of those Member States with large financial centres - notably France, Germany, the Netherlands, Luxembourg, and Ireland - can be expected to dominate.