Dr Andreas Dombret, who sits on the board of the Bundesbank, said that any deal struck between the UK and the European Union following Brexit would be “miles away from access to the single market” the Telegraph reports.
He was speaking in a private briefing for German businesses and banks earlier this week. His comments were first reported by the BBC.
Banks in the City of London have long argued that there is no alternative to membership of the single market that provides the same level of certainty or access that they currently enjoy. However, the UK Government last month ruled out the possibility of seeking to retain membership of the single market following Brexit.
Access to the single the market for financial services firms is therefore likely to come through some form of “equivalence”. This would be a form of negotiated access whereby the UK-based financial firms could sell their services to customers in the EU as long as the UK maintained a regulatory regime that was deemed to be “equivalent” to that in the EU.
A number of UK-based firms have also said that they will need to set up subsidiaries within the EU. However, the location of these subsidiaries and the number of jobs that are likely to be moved to them from London is a matter of fierce debate.
Dr Dombret laid out a hard line in his comments at the event organised by the Boston Consulting Group in Frankfurt, according to the BBC. He said: “The current model of using London as a gateway to Europe is likely to end.”
The Bundesbank executive, who is responsible for banking and financial supervision, also appeared to react to implicit threats made by Philip Hammond, the UK Chancellor of the Exchequer, who, earlier this month said that, were the UK not to get an all-inclusive trade deal with the EU, the Government could employ other means to ensure the economy remained competitive.
This was taken to suggest that the UK could reduce corporation tax and the regulatory burden to make itself move attractive to international businesses and investment.
“Some voices are calling for deregulation after Brexit,” said Dr Dombret, according to the BBC. “One such example is the ‘financial centre strategy’ that is being discussed as a fallback option for the City of London. Parts of this recipe are low corporate taxes and loose financial regulation.
“We should not forget that strictly supervised and well-capitalised financial systems are the most successful ones in the long run.
“The EU will not engage in a regulatory race to the bottom.”