Duncan Roberts: If we can turn our minds back to Christmas Eve, what were your thoughts when it was announced that a deal between the EU and the UK had been agreed?

John Marshall: Quiet satisfaction. It was quite satisfying a way to see the whole process through in accordance with the timing that we envisaged. Obviously, we would have preferred to have reached agreement slightly earlier on, looking for maybe the sort of crunch moment to be in mid-October rather than at the end of December. That’s often the way these negotiations go. It is to the credit of negotiators on both sides that they were able to achieve so much in a relatively short period of time.

Nicolas Mackel: Relief probably is the one word that would best describe my feeling. The terms of the agreement in its substance may not change much for the financial services industry. But its existence is important because it changes the atmospherics. Had there not been an agreement, and a departure in acrimony, I think it would be much more difficult to envisage a smooth relationship continuing in financial services.

DR: How do you think the way the negotiations were handled has paved the path for future talks regarding financial services?

JM: I mean, we obviously were looking for more on financial services within the agreement. The Commission made clear early on in negotiations that they weren't ready to engage. And, you know, we would have liked something within the agreement that provided for close cooperation on regulatory issues, to provide predictability, transparency, certainly for businesses and consumers, and that wasn't possible.

NM: We understood very early on, in fact, ever since the first Chequers plan of July 2018 that financial services were probably not going to be included. Now John says that the UK wanted more. I actually never saw them asking for more in financial services besides mutual recognition…things that weren't going to fly. It would probably even have been very, very difficult even had financial services been part because it's probably where really there would have been a major battleground. I think that now building piece by piece--and also what will help is that the UK, which initially, at least from the outside, gave the impression of not knowing exactly where it wanted to steer towards the latter part of the negotiations--it became clearer what it wanted. And I hope that going forward, this clarity will be even more pronounced so that we can see where the UK wants to diverge, where the UK wants to continue to be aligned.

JM: I would disagree that there has been any sort of lack of clarity on our side as to what we're seeking to achieve…

NM: I said, seen from the outside.

JM: Nicolas, like me has made it his job since before the referendum. And I would, you know, agree that there have been times over that four-year period where there hasn't been total clarity, because we've been trying work out what it was that we wanted to implement the decision that the British public took on 23 June 2016. But you know, certainly since the election in December 2019, when the Conservative Party won on the basis of a manifesto which set out clearly the approach that we would take in the negotiations. And then we published our approach, in February, setting out very clearly the principles that would guide our approach in negotiations.

DR: So now, the UK and the EU are starting talks on reaching a memorandum of understanding on financial services. What do you think this MoU could entail and is a deadline of the end of March viable?

N.M.: The way I read it, it is an MoU whereby the two sides agree to set up a framework for future regulatory dialogue, not regulatory negotiations, nothing of the kind. It’s not something where you really negotiate equivalences, because they’re not negotiable, they’re unilateral. But, given the continued importance of London as a financial centre, the EU should not make the mistake of not listening anymore to the expertise that is available in London. We have seen in times of crisis, like this, like 2008, we see on issues like fintech and sustainable finance, there is a lot we can still learn from the UK, and the other way around. That the declaration sets the March deadline shows that they are serious about it, they want to progress, and that, I think, is very encouraging.

J.M.: There are going to be discussions that will hopefully lead to agreement on this MoU. And then we’ve got this outstanding question of whether there will be further equivalence decisions. I would say we’ve been very clear that in whatever sector, including financial services, we retain the right to regulate. We’ve already announced some areas where we do intend to diverge. But what we’ve also said consistently, again, across all sectors, including in financial services, is that we’re not going to diverge for the sake of it.

DR: But [European financial services commissioner] Mairead McGuinness had said the EU’s interest is “making sure that we are not captured by a system that we don’t regulate.” So, is there any chance of concrete progress?

J.M.: In our view, decisions should be taken on how things are now, and if things change in the future in a way that the [European] Commission finds unacceptable, then obviously they have the right to sort of suspend or withdraw those decisions. We would hope that that would be done in the context of the dialogue that hopefully will be provided for as the result of this MoU.

N.M.: It’s not quite that simple. I think the commission does have a point when it says it needs to be a decision that is taken on the basis of how things are today. But as long as you cannot give some sort of commitment that you intend to keep it equivalent, it’s difficult for us to grant such an equivalence. So, I do think that there are two sides to this coin, and two views that are equally valid.

DR: There has been some movement of assets and jobs to Luxembourg and other EU financial centres, but it maybe didn’t materialise to the extent that many expected. Do you think there will be further exits from London over the next year or so?

N.M.: The answer is clearly yes, more will follow. But the mistake that many people are making is they only count the jobs that left London. In fact, you need to count the jobs that have been created elsewhere, where you do see an impact. What happened over the last four years… was firms set up more or less contingency operations. And even these contingency operations grew over the last two years. Take one example, M&G here in Luxembourg. I think they started out at 10, they’re now at 43. And you have plenty more of those. Initially, I always said, in my opinion, 3,000 jobs [would be created in Luxembourg] in the first two years of Brexit. I think we are already at least at 2,000 jobs. So, we’ll easily do the 3,000 over the first two years. But that’s not what our French or German friends at one stage thought of as in terms of multiples of tens of thousands.

DR: On the other hand, London might have some new opportunities that could create jobs in the City.

J.M.: The City is an extremely dynamic place full of incredibly expert and entrepreneurial people, and they will seize those opportunities.

N.M.: I don’t see any opportunities that would not have been available while you were a member of the EU.

J.M.: The chancellor back in November set out a bit of a vision for the financial services sector, particularly around sustainable green finance and tech areas. I think there is an innate confidence that the City will continue to make most of the existing opportunities, reinvent itself, adapt, develop, always be at the vanguard of exploring new avenues and financial services. And it will still be an incredibly attractive and appealing place for people to work. And not just for British people, but for people from across the EU and across the globe.

N.M.: I’m partly very optimistic also for London, because if you look at not only the expertise and the intelligence that is available in London, but also the UK’s academic sphere, and you combine both, you can certainly create something very powerful. On the other hand, I always think that if you are a financial centre, you are serving a geographic market. If the EU market is off limits, if the US will remain closed, India, China will remain closed; what is it that will be the UK’s primary geographic market?

J.M.: I think that it can be anchored in geography. But at the same time, there’s something that’s global, and supra-regional. Essentially, the opportunities are there to be discovered. And it’s up to us now, to see what we can do with this freedom of action that we now have, and I’m not just talking about financial services. And again, that’s not something that is going to be clear after one month, or one year, it’s going to take five to ten years or so.

An edited version of this interview was first published in the February print edition of Delano, currently available at newsstands.