The EU has agreed on tighter rules for asset managers and investment firms offering "bank-like" services, such as proprietary trading and underwriting of financial instruments.wanting to operate in the bloc after Brexit.
This means London's financial services industry will have to follow closely EU standards on everything from capital requirements to bonuses in exchange for market access.
The agreement will give the European Commission more power in overseeing foreign financial firms operating in the EU, including more clout over London-based financial firms after Britain leaves the EU, Reuters reports.
The new measures will require the European Commission to carry out especially rigorous assessments of whether large non-EU financial centres have equivalent standards of regulation and supervision to those applied within the bloc. The overhaul also imposes stricter liquidity and capital requirements on large EU investment firms, partly tightening an initial proposal put forward in 2017.
The agreement further strengthens the equivalence regime that would apply to third-country investment firms"
"The agreement further strengthens the equivalence regime that would apply to third-country investment firms," the EU said in a statement. The Commission will also get more power to assess whether foreign rules are compatible with EU regulations.
The updated market-access rules will apply to all non-EU countries, and will be relevant for the UK if it crashes out of the EU without a deal, or at the end of its post-Brexit transition period.
More than half of the 6,000 European investment firms have their EU headquarters in Britain, although many have started setting up continental offices to ensure they can continue to serve clients after Brexit.