Michel Barnier, the EU's Chief Brexit Negotiator, has delivered a speech to the European American Chamber of Commerce, outlining his views on "how a close relationship with the UK", including in relation to financial services, can be achieved.

Mr Barnier questioned why the "equivalence system", which in his view works well for the US industry, should not also work for the UK. The EU has adopted over 200 equivalence decisions, covering more than 30 overseas jurisdictions. In Mr Barnier's words, this "integrates financial markets and facilitates the work of financial operators in the EU and the foreign jurisdiction". Such an approach would allow the EU to decide unilaterally whether UK laws are as strict as its own (or "equivalent") and also have the power to withdraw the system at short notice. It also likely falls short of the degree of access to European markets that many UK financial services firms would ideally like to be able to retain following Brexit.

Finishing the speech expressing the need and desire for co-operation, Mr Barnier noted that the EU and UK need to keep a "joint regulatory effort in mind", be ready to exchange ideas for future rules "in the context of close and voluntary cooperation" and, of course, "cooperate…in international fora such as the Financial Stability Board and Basel Committee".

Outside of this common “ecosystem” of regulation, supervision and enforcement, there can be no passporting. The UK has recognised this point, in Ms. May's Mansion House speech.

But the UK still wants continuity. It would want the EU to accept UK standards by means of a system of mutual recognition.

The UK needs to understand that the EU cannot accept such mutual market access without all the safeguards that underpin it.