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LONDON (Reuters) – The United Kingdom and the European Union have made progress on a deal to give Londons dominant financial centre basic access to EU markets after Brexit, two British officials said, but no agreement has yet been clinched.

The deal being discussed would be based on the EUs existing system of financial market access known as equivalence – a watered-down relationship that officials in Brussels have said all along is the best arrangement that Britain can expect.

The Times newspaper said a tentative deal had been reached on all aspects of a future partnership on services, as well as exchange of data and including what would amount to a concession from the EU on bending the equivalence rules.

Officials in Brussels and London said The Times report was wrong.

“We are making progress,” a British official, who spoke on condition of anonymity, told Reuters. A second British official also speaking on condition of anonymity said that, while there was progress, nothing was finalised yet.

A spokesman for Prime Minister Theresa May said reports of a deal were speculation and that Britain wanted to go beyond the existing equivalence regimes.

The European Commission said a future financial services agreement would only be discussed after a Brexit divorce deal has been finalised.

Talks over a broader deal are mired in a disagreement over an Irish backstop – an insurance policy to ensure there will be no return to a hard border on the island of Ireland if a future trading relationship is not in place in time.

Many top bankers fear Brexit will slowly undermine Londons position as the worlds biggest international financial centre, and a Reuters survey found that, so far, just over 600 are moving away.

Global banks have already reorganised some operations ahead of Britains departure from the European Union, due on March 29.

The pound jumped following The Times report, reaching $1.2905 GBP=D3 by 1150 GMT and extending gains after the Bank of England hinted at a slightly faster pace of interest rates increases.

Britain is currently home to the worlds largest number of banks and hosts the largest commercial insurance market.

About six trillion euros ($6.8 trillion) or 37 percent, of Europes financial assets are managed in the UK capital, almost twice the amount of its nearest rival, Paris.

In addition, London dominates Europes 5.2 trillion euro investment banking industry. While New York is by some measures bigger, it is more centred on American markets.

BREXIT AND THE CITY

Since Britain voted to leave the EU more than two years ago, some of the worlds most powerful finance companies in London have been searching for a way to preserve the existing cross-border flow of trading.

Canary Wharf skyline and the City of London can be seen from the Sea Containers building in London, Britain, October 11, 2018. REUTERS/Henry Nicholls

The arrangements being discussed fall far short of that.

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Currently, inside the EU, banks and insurers in Britain enjoy unfettered access to customers across the bloc in all financial activities.

Equivalence covers a more limited range of business and excludes major activities such as commercial bank lending.

“Our objective is to go beyond existing EU equivalence regimes and agree a new economic and regulatory partnership with the EU in financial services,” a spokesman for May said. “This would be based on the principle of autonomy for each side over decisions regarding access to its market.”

Under the current system, Brussels can scrap an equivalence designation within 30 days in some cases – a step it has never taken – and Britain has called for a far longer notice period.

The Times reported that neither side would unilaterally deny market access without first going through independent arbitration and providing a notice period significantly longer than 30 days.

An EU official who spoke on condition of anonymity took the unusual step of directly denying The Times report, as did a British official.

The EU official said there was no such thing as guaranteed access to the EU market and that the equivalence regime, which the EU has been offering to Britain since July, could only ever be unilateral.

Supporters of Brexit had hoped that leaving the EU would allow them to dispense with EU rules on financial services such as caps on bankers bonuses to turbo-charge London as a financial hub.

FILE PHOTO: Britain's Prime Minister Theresa May stands at the door of 10 Downing Street in London, Britain, October 24, 2018. REUTERS/Henry Nicholls

Britains Financial Conduct Authority said on Wednesday that UK financial rules should stay aligned with those in the EU after Brexit, a basic condition for Brussels to grant equivalence.

Faced with having Europes biggest financial centre on its doorstep, the EU has begun tightening conditions for equivalence in areas such as clearing derivatives and investment banking.

Britain on Wednesday said there was no set date for Brexit talks to finish, backtracking after Brexit minister Dominic Raab suggested terms could be finalised by Nov. 21.

Additional reporting by William James in London and Jan Strupczewski in Brussels; Writing by Guy Faulconbridge in London; Editing by John Stonestreet

Our Standards:The Thomson Reuters Trust Principles.

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