(Bloomberg) -- Portugal’s Europe minister suggested that U.K.-based banks hoping to keep so-called passporting rights in the European Union after Brexit may instead end up with a status more like that of their Swiss counterparts.
The future for British banks in the bloc will be “dependent on the model of relationship that the United Kingdom intends to keep with the EU,” Secretary of State for European Affairs Margarida Marques said in an e-mailed response to questions. “For example, Swiss companies don’t have a financial passport and have to resort to subsidiaries” in the EU to do business there. She gave no further details of her thinking.
U.K. Prime Minister Theresa May has said she will fight for the City of London to retain passporting rights, allowing banks based there to sell products and services throughout the bloc’s $19 trillion economy, after June’s vote to quit the EU. She’s said she won’t trigger the mechanism to start two years of talks on a Brexit deal before the end of this year, giving the U.K. government time to prepare its negotiating position.
The legal and regulatory framework for passporting is geared to banks based in an EU country and negotiating any new arrangement promises to be “very difficult,” German lawmaker Michael Fuchs, an ally of Chancellor Angela Merkel, said in an interview on Tuesday.
Among Swiss banks, UBS Group AG and Credit Suisse Group AG have used London’s passporting rights to sell products to their EU clients.
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It’s in the interest of both the U.K. and the EU to reduce the uncertainty of the transition process and of the future relationship, Marques said. She urged May to trigger the exit mechanism by invoking Article 50 of the bloc’s Lisbon Treaty “as quickly as possible.”
The Portuguese minister said the broader post-Brexit deal is likely to differ from that for other European countries, some of which are largely integrated into the single market. “It’s very probable that the future of the U.K.’s relationship with the EU will involve a different formula than the ones that currently exist, such as with Switzerland,” she said. “It’s important to guarantee that the EU keeps a strategic relationship with the U.K.”
Portugal is insisting that continued access to the EU market depends on accepting free movement of labor, Marques said.
“The ‘red lines’ are well defined and there is a broad consensus at the European level,” she said. “In the scenario of a relationship in which the freedom of movement of people is restricted, that would mean no access to the internal market.”
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