EU chiefs are to demand tough rules for British bankers to abide by in order to keep access to European markets after Brexit.
In new laws being proposed in Brussels, the EU will demand we stick closely to their rules in order to stay trading in financial services.
Britain is home to around half of the EU's investment companies – which will in future have to abide by "equivalent" EU regulations.
The Commission wants to make it even harder for countries outside of the bloc to have the same level of access to their markets.
The draft legislation, seen by the Financial Times will have to be approved by other EU states, says that there is a need to "update the regulatory architecture in the EU".
Sources told the newspaper this means the UK would need to stay in harmony with EU rules to benefits from the access – including limits on bankers pay and bonuses.
Bank of England Governor Mark Carney has suggested that the cap on bankers bonuses – which limits them to no more than twice fixed salary – could be removed after Brexit.
Meanwhile, Britain's Bank of England is set to unveil plans to make it EASIER for European banks to stay in the UK after we leave.
Banks offering money and services to each other and businesses are to operate under the same rules.
EU branches will be able to carry on operating without having to set up separate offices in the UK, or apply for new licences to operate.
Currently banks anywhere in the EU can sell their services to anywhere else in the bloc thanks to rules known as a financial services passport.
But EU bosses are threatening to withdraw our access to this after we leave – which David Davis wants to include in a trade deal.
Yesterday EU chief negotiator Michel Barnier sparked a row over banking by saying that there was "not a single trade agreement that is open to financial services" and we would have to strike a new deal with the bloc after we leave.
But Theresa May hit back, insisting that we CAN have a special Brexit deal to protect our booming banking sector.
The Prime Minister's Official Spokesperson said that although cabinet did not discuss Mr Barnier's words: "As we’ve said throughout, we’re confident of negotiation a deep and special economic partnership that will include a good deal for financial services.
"As we’ve always been clear that will be in the EU’s best interests as well as ours."
And lobby group TheCityUK insisted: "Just because financial services have not been encompassed in free trade agreements to date is no reason to dismiss them from a future UK/EU free trade agreement".
Mr Barnier has infuriated EU leaders by going behind his brief, The Sun also revealed.
Ministers have been told that senior Brussels figures – including EU Commission boss Jean Claude Juncker – are “not happy” with their chief negotiator for his unauthorised rants.
Mr Barnier has been told by the EU to wait until they are ready in March before he is given official instructions on what the 27 member states are prepared to agree with with the UK.
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