The direction the EU appears to be taking post-Brexit could throw up opportunities for the UK.

At its base, the EU’s Markets in Financial Instruments Directive II (MiFID II) ticks all the right boxes: it enhances investor protection, improves market transparency and facilitates a fairer trading environment.

Outcomes of this sort can only be welcomed in the wake of the last financial crisis. But since the UK voted to leave the EU in 2016, amendments to MiFID II have, perhaps unsurprisingly, centred on relations with third countries. Many of these changes reflect two worrying trends: regulatory overreach on the one hand; and the turn towards a more closed financial market on the other. It is concerning that parallel developments have been playing out across the union’s financial rulebook over the same period. 

There are two reasons for this trend. The first is a necessary recalibration of the EU’s financial market interactions with third countries. This is understandable, given that the bloc has lost its leading international financial centre in the form of London. The second explanation involves the diminished size of the club of countries championing the role of free and open markets. The departure of the UK has left just a handful of smaller member states, including Ireland, the Netherlands and the Nordic countries, to fulfil this role. But they are seriously outmuscled by larger neighbours that take a very different view of financial markets and their role in the global economy. 

It is hardly surprising then, that in the wake of Britain’s departure, the EU’s financial regulation has adopted a more dirigiste flavour. Indeed, this trend is likely to accelerate in the coming years, and it will have implications that stretch far beyond London or Brussels. For one, the global political and economic order is changing at breakneck speed.

This is throwing up serious challenges but it is also giving rise to peerless opportunities. From the meteoric rise of new centres of wealth in Africa and Asia, to a changing US financial regulatory landscape, to the probable demise of Hong Kong as a diversified international financial centre, the time is ripe for a renewed commitment to an open, cross-border trade in financial services that ultimately benefits the end investor. If Brussels continues on its current trajectory, it could well be London’s gain. 

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