The European Union spurned United Kingdom calls for a legislative fix to the threat Brexit poses to trillions of dollars of financial contracts, telling banks and insurers to solve the problem themselves.
Speaking in London today (24 April), Valdis Dombrovskis, vice-president of the European Commission, said the United Kingdom would have to rely on the system of "equivalence" where the European Union removes some regulatory barriers if it judges that a jurisdiction is well-regulated.
At issue are £96 trillion (€110 trillion) of derivatives and tens of millions of insurance policies that United Kingdom regulators say might be thrown into disarray because firms could lose their ability to fulfil agreements with clients.
But Dombrovskis said this meant adapting equivalence when applied to a country that is systemic for the EU - Britain is the biggest financial centre in Europe. Chancellor Philip Hammond last month called the system "wholly inadequate" for the finance sector.
Bailey says agreement to an implementation period will also provide better continuity for British firms doing business in the EU.More news: Saudi security forces shoot down toy drone in Riyadh
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Once the United Kingdom leaves, those permissions will likely fall away, leaving firms unable to service cross-border contracts.
"While it is necessary to have unilateral actions in place for the United Kingdom, this is nonetheless a distinctly second best solution to the United Kingdom and European Union authorities working together to deal with the risks", Bailey said.
The financial industry has proposed possible solutions, including so-called grandfathering of contracts so that they can run to maturity under existing laws.
While it is not final, the Bank of England has said firms should have confidence in a "back-stop" provided under the UK Government's plans to legislate, if necessary, to create temporary permission regimes to allow relevant firms to continue their activities in the UK for a limited period after withdrawal.
"To make this less likely to occur, supervisors need to work together". "Financial stability is far too important to engage in a standoff".