Banking News dated 26th November 2018

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Banking News: November 26, 2018


Finance Ministry hopes 3-4 banks  to be out of RBI’s PCA this fiscal

Finance Ministry hopes 3-4 banks
to be out of RBI’s PCA this fiscal

The Press Trust of India
Published on November 25, 2018

New Delhi, November 25 (PTI): The finance ministry hopes that 3-4 banks would come out of the RBI’s Prompt Corrective Action watchlist this fiscal, following the expected modification of guidelines and apparent improvement in bottom-line of the public sector banks, sources said. Of the 21 state-owned banks, 11 are under the PCA framework, which imposes lending and other restrictions on weak lenders. These are Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, UCO Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Dena Bank and Bank of Maharashtra.

Last week, the RBI in its central board meeting decided the issue of banks under Prompt Corrective Action (PCA) will be examined by Board for Financial Supervision (BFS) of the central bank. The PCA framework kicks in when banks breach any of the three key regulatory trigger points — namely capital to risk weighted assets ratio, net non-performing assets (NPA) and return on assets (RoA).

Globally, PCA kicks in only when banks slip on a single parameter of capital adequacy ratio, and the government and some of the independent directors of the RBI board, like S Gurumurthy, are in favour of this practice being adopted for the domestic banking sector as well. However, the RBI has strongly defended the PCA framework in the past.

Last month, its Deputy Governor Viral Acharya had said that any relaxation in the PCA imposed on weak banks should be avoided as it is an essential element of its financial stability framework. “Imposition of PCA can thus be seen as first, stabilising the banks at risk, and then, undertaking the deeper bank reforms needed for long-term viability of the business model of these banks,” he had said.

Sources further said various measures taken by the government, including implementation of Insolvency and Bankruptcy Code (IBC), have yielded good results in terms of reining bad loans and increasing recovery. So, the review by the BFS of RBI, improving performance of the banks and recovery due to IBC give hope that 3-4 banks could move out of PCA by the end of March 2019, they added.

Banks have made recovery of Rs 36,551 crore during the first quarter, registering a 49 per cent growth over the last fiscal. At the same time, operating profit has risen by 11.5 per cent, while losses fell 73.5 per cent on quarter on quarter basis, he said, adding asset quality has been addressed through falling NPA slippage. Provision Coverage Ratio of banks has improved to a healthy level of 63.8 per cent.


Tax on free services: PMO set to wade into
₹40,000 crore spat between banks, revenue dept

K Ram Kumar
The Business Standard
Published on November 26, 2018

May convene meeting this week

Mumbai, November 25: With banks staring at a massive tax outgo of ₹40,000 crore on free services provided to customers to maintain a minimum balance, and revenue authorities in no mood to give up their claims, the Prime Minister’s Office is set to convene a meeting this week between bank chiefs and top Finance Ministry officials to resolve the issue.

Bankers and officials of key Finance Ministry Departments — the Department of Revenue (DoR) and the Department of Financial Services (DFS)— could not achieve any breakthrough at a meeting in June. “The issue has now been escalated to the Prime Minister’s Office (PMO) for suitable intervention and resolution,” said a banker aware of developments.

The lingering issue

Revenue authorities want banks to cough up tax (service tax plus penal interest plus penalty) for the 2012-2017 period. Bankers warn that if they have to pay the tax, it could lead to withdrawal of free banking services, including to those who have opened accounts under the NDA government’s pet financial inclusion programme (Pradhan Mantri Jan Dhan Yojana).

In a bid to rake in more taxes, the revenue authorities have assessed the value of free services provided to account holders maintaining a minimum balance and asked banks to pay tax. It appears their view is that provision of free services is leading to denial of revenue to the exchequer.

Banks, to an extent, provide free services, including cheque leaves, ATM withdrawals, cash deposits, monthly account and locker visits.

According to S Ravi, Practising Chartered Accountant and banking expert: “Free services are ensuring that more unbanked people can benefit from banking services. If, on the one hand, you encourage more people to embrace banking, and on the other hand free services are taxed, then banks will have to pass on the increased costs to customers.

“The intent of the government via PMJDY has been to provide banking access to people across the country. Tax on free services provided by banks will discourage opening of new accounts.”

Bankers say the PMO needs to settle festering issue once and for all.


Panel on RBI’s capital framework
likely to be formed this week

The Press Trust of India
Published on November 25, 2018

Mumbai, November 25 (PTI): The government and the Reserve Bank will likely by this week appoint members of an expert committee which will look into the economic capital framework (ECF) of the central bank, a source said. In its nine-hour meeting held last week, the RBI’s board had decided to constitute a committee of experts to examine the ECF, the membership and terms of reference of which will be jointly determined by the government and the RBI. It will determine the appropriate levels of reserves the central bank ought to hold. “The names will be decided by the RBI governor and the Finance Ministry together in next 5 to 6 days,” the source said.

The committee will have minimum of three people, which will include present and past central bankers, and officials from the Finance Ministry, the person said. “Within two-three months, the committee will submit its recommendations. The idea is to submit the report before the closing of the financial year,” the source added. As of June 30, 2018, RBI’s reserves stood at Rs 9.43 lakh crore, with a major portion of the reserves coming from contingency fund (Rs 2.32 lakh crore) and currency and gold revaluation account (CGRA) (Rs 6.91 lakh crore). While the contingency fund stood at 6.41 per cent of the total assets of the RBI, the CGRA was 19.10 per cent in the year ended June 30, 2018.

In the past, the issue of the ideal size of RBI’s reserves was examined by three committees — V Subrahmanyam (1997), Usha Thorat (2004) and Y H Malegam (2013). While the Subrahmanyam committee recommended that contingency reserve should be built up to 12 per cent, the Thorat committee had said the reserve adequacy should be maintained at 18 per cent of the total assets. The RBI board did not accept the recommendation of the Thorat committee and decided to continue with the recommendation of the Subrahmanyam panel.

The Malegam committee recommended that adequate amount of profits should continue to be transferred each year to contingency reserves. The issue of transfer of RBI’s reserves to the government has been a contentious issue between the two sides for a long time. Recently, RBI Independent Director and Swadeshi ideologue S Gurumurthy had made a case for calibration of RBI’s massive reserves and said no central bank in the world maintains such high levels of surplus.

In the November 19 meeting, the RBI board also decided on a slew of measures, including a restructuring scheme for MSME borrowers with credit facilities of up to Rs 25 crore and giving banks some concession on capital adequacy norms. It also decided to refer the issue of relaxing prompt corrective action (PCA) framework for weak banks to the Board of Financial Supervision (BFS) of the RBI.


RBI should push for fresh issuance of shares by
banks to meet licensing guidelines, say investors

The Press Trust of India
Published on November 25, 2018

Mumbai, November 25 (PTI): As the RBI deadline approaches for the Kotak Bank promoters to reduce their stake to 20 per cent, investors are getting anxious about possible scenarios given the difference of opinion between the lender and the RBI over ways to meet the directive. Some investors on condition of anonymity said the RBI should push for fresh issuance of shares by banks to meet licensing guidelines. Fresh issuance of shares is a process that serve dual purpose, it avoids creating any conflict of interest vis-a-vis the promoter on one hand while simultaneously bringing in more resources for the banks which would support its growth plans going forward, they noted.

The RBI had earlier asked promoters of Kotak Mahindra Bank to bring down their stake to 20 per cent by December 2018 and 15 per cent by March 2020 in line with the guidelines for new bank licenses released four years ago. The RBI licensing guidelines for new private sector banks 2013, calls for promoter holding to be brought down in phases, first to 40 per cent at the end of five years from the date of commencement of business operations.

Subsequently, it needs to be brought down to 20 per cent at the end of 10 years and 15 per cent at the end of 12 years. The 2016 guidelines calls for reduction in promoter shareholding to 15 per cent in 15 years. Experts however feel that while the RBI’s objective of diversified ownership is well reasoned but this may actually end up stifling the banking industry’s growth as a widely held institution does not guarantee governance and ensure success.

In August this year, Uday Kotak, the founder and promoter of Kotak Mahindra Bank, had pared down his stake in the bank to 19.70 per cent from about 30 per cent following issuance of Perpetual Non-Cumulative Preference Shares (PNCPS) to eligible investors. Kotak’s holding in the bank prior to the preference share issuance was 29.74 per cent. The RBI however, has not approved this plan and the bank is currently engaging with the RBI on this matter as less than two months are left to meet the guidelines.

According to a Morgan Stanley analysis, there can be three possible consequences to this situation — first, the RBI gives approval for stake reduction via PNCPS issuance; second, the RBI delays 20 per cent stake reduction timeline by few months, but keeps milestone of stake reduction to 15 per cent by March 2020 unchanged and third, the RBI disagrees to stake sale reduction via PNCPS issuance.

The report further noted that in case the RBI disagrees on stake sale reduction via PNCPS, it can lead to secondary stake sale by promoter, or the bank may take legal action against the RBI, there is possibility of M&A, or primary issuance or the bank does not meet its promoter stake sale reduction deadline of 20 per cent by December 2018.


Penny stock entities under taxman’s lens

Rahul Wadke
The Business Line
Published on November 24, 2018

Officers told to probe into 95 companies and
look for ‘bell shape’ price movement of scrips

Mumbai, November 24: In a bid to crack down on bogus Long Term Capital Gains (LTCG), the Income Tax (IT) Department has initiated a fresh drive against penny stock companies. It has already initiated action against 95 entities and has now formulated an exhaustive Standard Operating Procedure (SOP) document to get more into the tax net.

Tax officers across the country have been asked to undertake a thorough investigation and send tax demand notices to all such companies where tax evasion is positively established by December 31. Although penny companies have been on the radar of the IT Department and the Finance Ministry for the last few years, only a small part of the illegal trade has been exposed so far.

A senior IT officer said tax evasion using penny stock companies started after the Finance Act (2004) came into force, when the Centre introduced the Security Transaction Tax (STT) both at the time of purchase and sale of the shares. Consequently, STCG (Short Term Capital Gain) emanating from share transaction was revised from 30 per cent to 15 per cent. But the tax on LTCG was exempted.

“Later, the tax exemption became a major route for tax evasion, as operators acting in tandem with brokers and scrip promoters, came together and started to use this method for providing bogus long-term capital gains or losses,” the officer told BusinessLine.

The officer also said that IT officers have been asked to be especially vigilant about tax assessees purchasing shares of companies devoid of any fundamentals. Investment in a listed company without any major business, as seen from its earlier profit and loss accounts, and which do not have any fixed assets such as plant and machinery are sure shot bogus companies, the SOP states. The assessing officers have been told to look for price movement of scrips that is in a ‘bell shape’, which means a huge rise in price over a short span of time and then a sharp decline thereafter.

Modus operandi

Highlighting the modus operandi adopted by tax evaders, officials said the most important person in this entire process is the scrip operator — the central person who manages the overall scheme of the scam. This operator maintains a complex network of various bogus entities and is also in control of some companies whose shares are listed on the stock exchanges. He also has close nexus with share brokers.

Any person desirous of becoming scrip operator needs to have control over various bogus entities, including companies/firms/ proprietorship concerns; these are popularly known as Jama-Kharchi entities. Thus the entry operators, dealing in providing the bogus share capital/loan/cheque discounting, are naturally the persons who become scrip operators, as they already have a plethora of Jama-Kharchi entities with them, the officer said.

Jama-Kharchi entities are held in the name of various persons, who are either the operators’ own employees or any other person, who is ready to give his name, signature, PAN card, etc., for Rs. 2,000-10,000.

Many a time, operators also managed to list their own bogus Jama-Kharchi company in some stock exchange by coming out with an IPO, which is subscribed fully by their own Jama-Kharchi entities. Sometimes, scrip operators are not able to purchase a listed company or unable to get their own company listed, because of a financial crunch.

They then connive with promoters of a penny stock company having a small capital base and all of whose shares are in control of the promoter. This allows the operator to manage each and every share of the company for some brokerage. They also sometimes benefit from high share prices, which can be used for taking loans from banks, the officer said.


The real reason behind
RBI Govt spat over PCA framework

Aparna Iyer, The Mint
Published on November 26, 2018

The impact of 17 banks out of 21 public sector banks being under RBI’s PCA framework would be disastrous for lending to MSMEs

The Reserve Bank of India’s (RBI’s) prompt corrective action (PCA) rules state that banks which breach the third threshold for any parameter are ripe candidates for a merger with another bank. Analysts at brokerage firm Jefferies India Pvt. Ltd have identified four banks that breach the third threshold under various parameters based on data from latest September quarter results.

IDBI Bank Ltd, the weakest lender, has breached the third threshold for net bad loans, capital adequacy ratio and common equity Tier-1 ratio. Indian Overseas Bank has breached the third threshold on three parameters as well, while Bank of India and United Bank of India have fallen foul on one count.

The September quarter results also revealed that six banks which are currently not under PCA should be, because of the extensive erosion in their capital notwithstanding government infusion. To be sure, RBI considers annual performance in determining the need for a bank to be put under PCA and therefore the performance for the first half of a fiscal year is not a real indicator.

As an earlier Mint report stated, based on the annual March 2018 results, four banks that were not already under PCA had crossed the threshold on asset quality. Latest results show the list has expanded to six banks. Clearly, unless RBI PCA norms are relaxed, more state-run banks are expected to be put under corrective action, rather than the government’s expectation that restrictions are lifted on some.

It becomes clear why the government has been insisting that RBI should revisit its PCA framework. At the last board meeting of the central bank, it was decided that a committee would look into these norms and give recommendation to the board.

Whatever the decision, the outlook on profitability of these banks is far from being sanguine. Analysts expect slippages to rise in the coming two quarters because of the stress from Infrastructure Leasing and Financial Services Ltd. Since most banks are at the bare minimum regulatory requirement in capital, even a mild erosion of capital may send them into PCA.

The impact of 17 banks out of 21 public sector lenders being in PCA would be disastrous for lending. Public sector banks are crucial for giving loans to small businesses and their share is large. For instance, the half- yearly report on the government’s Mudra scheme shows that they contribute to more than half of the lending to small and micro businesses. Mudra is a scheme that offers refinance for loans up to ₹10 lakh given out by lenders.

The lenders are also an important platform through which the government can push its flagship social schemes. Non-banking financial companies that have become an important source of funding for small borrowers are not in a position to meet the demands any more due to the liquidity crunch.

But given the precarious state of some of these banks, the solution clearly is to adequately capitalize them, so that depositors’ funds are shielded.


Under PCA framework, yet 11 PSBs report
rise in share of retail loans, says Jefferies

The Business Line
Published on November 24, 2018

Mumbai, November 24: The 11 state-run banks, which are under the RBI’s prompt corrective action (PCA) framework, have seen a 400 basis points increase in their share of retail loans at 19 per cent in the four years ending September 2018, says a report.

The RBI began to place state-run banks under the PCA framework for the first time in September 2016, when their NPAs soared beyond the regulatory tolerance levels.

But the present data is for the period between March 2015 – when their retail share was only 15 per cent – and September 2018, when it rose to 19 per cent, according to the American brokerage Jefferies.

A report by the brokerage said on Friday it is often misreported that banks under PCA are not allowed to grow (gross loans have indeed fallen 10 per cent since March 2015).

“Yet their retail and home loans are up 16 per cent and 53 per cent. Their share of retail loans has risen from 15 per cent in March 2015 to 19 per cent in September 2018, while their share of home loans in retail has climbed from 46 per cent to 61 per cent in the same period,” the report said.

IDBI Bank worst hit

The PCA framework puts restrictions on weaker banks on many aspects, including fresh lending and expansion, and salary hikes, among others.

Of the 21 state-owned banks, as many as 11 are under the PCA framework now, and these banks’ NPAs hover in high double-digits. Bad loans of IDBI Bank is the highest at close to 33 per cent in the September 2018 quarter.

The 11 banks under the PCA are: Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, UCO Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Dena Bank and Bank of Maharashtra. These banks together control over 20 per cent of the credit market.

Among the current crop of 11 banks under the PCA, the first to fall in line was United Bank of India, in early 2014.

Private banks

The report, however, suspects that banks under the PCA have lost market share to private sector banks in corporate loans and unsecured personal loans, and that it will be a Herculean task for the affected banks to claw this back.

The report said so far 11 banks are under the PCA framework, but latest data suggest that 17 banks would be classified under the PCA, which could be the reason for the debate on the framework.

It can be noted that PCA has been one of the 12 serious breaking points between the government and the RBI, and a key issue raised in one of the three letters that the government shot off to the RBI on October 10 under the never-before-used provision of Section 7 of the RBI Act.


Across the Aisle:
Another institution is falling

P Chidambaram
The Financial Express
Published on November 26, 2018

Most people do not know or understand the critical role played by the central bank in the governance of a country. The principle of central bank independence is now virtually an immutable law.

The readers/viewers are spoilt for choice. There is the pre-scheduled India vs Australia series of cricket matches. There is CBI vs CBI. And the latest humdinger is Government vs Reserve Bank of India (RBI).

Every cricket player has his share of bruises, the CBI is broken and, in the case of the RBI, it has been severely bent.

The RBI is the central bank for India. Most people do not know or understand the critical role played by the central bank in the governance of a country. The main objective of a central bank is to secure monetary stability. The objectives of the Reserve Bank of India Act, 1934, are “to regulate the issue of bank notes and the keeping of reserves with a view to securing monetary stability”.

RBI, many roles

The RBI has several functions. It creates money. It issues currency notes. It sets the interest rates. It exchanges currency. It regulates transactions involving foreign exchange. It keeps the reserves. It manages the debt of the government. It licences and regulates commercial banks and non-banking finance companies. Many of its responsibilities are directly connected to the paramount objective of “securing monetary stability”.

The RBI’s core responsibilities are not different from the responsibilities of central banks of other countries that have an open economy. The premise on which a central bank stands ready and able to discharge its responsibilities is ‘central bank independence’. The Charter of the European Central Bank states, inter alia, “neither the ECB, nor a national central bank, nor any member of their decision-making bodies shall seek or take instructions from Union institutions, bodies, offices or agencies, from any government of a Member State or from any other body”.

The principle of central bank independence is now virtually an immutable law. Therefore, although the RBI was constituted under an Act of Parliament, the RBI is not — and cannot be treated like — a Board-managed company. Everywhere in the world, central bank = Governor (or Chairman). It is this principle of central bank independence that has been challenged by the NDA government. Everything that is done under the Act, therefore, has to be consistent with the underlying premise of the Act; otherwise it would be ultra vires.

Independence Challenged

On November 19, 2018, the principle was severely tested — and breached. At a meeting of the Board of Directors of the RBI, four decisions were taken:

    The Board decided to constitute an expert committee to examine the Economic Capital Framework (ECF), the membership and terms of reference of which will be jointly determined by the Government and the RBI;

    The Board advised that the RBI should consider a scheme of restructuring of stressed standard assets of MSME borrowers with exposure up to Rs 25 crore;

    The Board decided to retain capital adequacy ratio (CRAR) at 9% and agreed to extend the transition period by one year; and

    The Board decided that the issue regarding banks under the Prompt Corrective Action (PCA) Framework will be examined by the Board of Financial Supervision of the RBI.

In my view, it was a disastrous meeting that cut a dangerous new path. On three of four matters, the Board took decisions. Once the government had drawn blood, it stepped back from actually invoking Section 7 (to issue Directions) or Section 58 (to make Regulations). Nevertheless, it is clear that the camel has its nose in the tent; it is only a matter of time before it has its trunk and feet inside.

I have no reservation in believing that most of the independent directors on the Board are distinguished professionals or successful businesspersons in their respective field or fields. However, none of them was, or is, a central banker and none of them has domain knowledge of central bank functions. Besides, from many accounts of the meeting, it can be inferred that the independent directors were not independent of the government that appointed them; they seem to have enthusiastically supported the government’s position. The same Board had failed the country when it meekly endorsed demonetisation on November 8, 2016. Now, after two years and 10 days, the Board has once again failed the country by breaching central bank independence.

Accountable, not Subordinate

It is par for the course for the finance minister and the Governor to agree (more often) or disagree (occasionally) on the repo rate or CRR. I am in favour of some tension between the government and the Governor and, on occasion, in favour of the government expressing its disappointment. I am in favour of Parliament calling the Governor more frequently to explain his actions before a committee. I am in favour of academics and the media fearlessly criticising the Governor’s decisions. However, I strongly disapprove of government-appointed directors deciding issues that fall within the jurisdiction of the central bank/Governor. Whether they do so ‘independently’ or on the ‘instructions’ of the government is immaterial; in either case it is an encroachment and will destroy the fundamental principle of central bank independence.

At the next meeting of the Board on December 14, 2018, there will certainly be a determined push by the government to make the Board decide on more issues. If Dr Urjit Patel does not stand his ground, and yields more space, another institution — a venerable one — would have fallen. For the present, I shall utter a prayer and keep my fingers crossed


Brexit: UK ignoring EU nations’ concerns

Vidya Ram
The Business Line
Published on November 24, 2018

Britain’s attention is on creating a great
trading nation and extricating itself from the union

This week as Prime Minister Theresa May appeared to recover somewhat from last week’s political turmoil — that saw several ministerial resignations and letters of no-confidence submitted against her — another potential stumbling block appeared. The 6.7-kilometre-square rock of Gibraltar.

The area was ceded to Britain in 1713, though Spain maintains a claim to the territory. Talks on the future of the rock have been ongoing and at points were fraught with some of the difficulties and political sensitivities that have characterised the Brexit process.

Rock of Gibraltar

While in past referenda Gibraltarians have rejected the option of either entering Spanish sovereignty (in 1967), or shared sovereignty (2002), during the Brexit referendum 95.9 per cent voted to remain in the EU.

While Gibraltar is outside the customs union that has proved at the heart of the complexities of much of Britain’s negotiations with the rest of the EU, the rock is heavily dependent on a Spanish workforce, thousands of whom cross to the territory each day.

Tensions ratcheted up early last year amid suggestions in the UK press that Spain would seek to use the Brexit negotiations — and the veto power it would hold over any UK-EU trade deal — to extract concessions on Gibraltar, including on the rock’s international airport. Britain’s then foreign secretary Boris Johnson reacted furiously, pledging “implacable and rock-like support.” One former Conservative Leader went even further: Michael Howard claimed Britain would be prepared to go to war to defend the rock — a comment that Downing Street very visibly refused to condemn or refute. However, over the past year, much progress appeared to have been made as Spanish Prime Minister Pedro Sanchez said in remarks widely reported in the British press that the issue of Gibraltar’s status would “no longer be a problem” for the withdrawal process, though separate bilateral talks on specific issues such as the movement of workers and taxation would continue.

However, this week it emerged that Spain is considering voting against the withdrawal agreement at a summit set to take place this weekend unless the withdrawal agreement specified that talks on Gibraltar were separate bilateral negotiations between Britain and Spain that did not form part of the wider “future relationship” talks between the UK and the EU. The government has shown little sign of backing down. “We are absolutely steadfast,” May told the House of Commons on Wednesday, insisting that ensuring Gibraltar was part of the exit negotiations was an absolute commitment.

The same attitude has prevailed when it comes to the issue of Northern Ireland, and the very real concerns of Northern Ireland (55 per cent of whose residents voted to remain) and the Republic of Ireland. Thanks to the DUP, the government’s ally since the 2017 general election, the debate has centred on the need to maintain unity and regulatory conformity across the UK — treating Ireland’s demands as almost an inconvenience, rather than to the very crucial role it would play in the maintenance of the peace process on the island. Another source of uncertainty has also come from France, which is eager for the agreement to include fishing rights for EU fishing boats in UK waters similar to those that already exist — an initiative believed to command the support of other EU nations.

Fractious infighting

The developments highlight how in the fractious infighting within the UK political circles, the concerns of EU countries have been by-and-large sidestepped in the public discourse. Attention has focussed on Britain’s aim of creating a great trading nation and extricating itself from the union — as well as the costs to the UK economy.

While Britain will unsurprisingly bear the brunt of the economic impact of Brexit, studies including one published last year on the “continental divide” highlighted how specific regions of EU nations would be significantly impacted — some parts of the Republic of Ireland could be hit as badly as London, while some regions of southern Germany face around a third the level of exposure as UK regions.

The lack of appreciation of these sensitivities in the UK has often heightened tensions. This week Prime Minister Theresa May faced a lambasting on social media following a speech to business leaders in which suggested that EU citizens had been able to “jump the queue ahead of engineers from Sydney or software developers from Delhi,” which would no longer apply after Brexit as part of plans to introduce a skills-based immigration system that was blind to where the person came from. As many pointed out, EU citizens had simply been exercising a right that had been shared by UK citizens elsewhere in Europe, who had been able to live and work freely as they chose.

Of course, EU nations have also chosen to take advantage of Britain’s political turmoil — seeking to lure investment from the rest of the world. Alongside private sector jobs, two EU agencies — the European Medicines Agency and the European Banking Authority and their hundreds of employees — are set to be relocated to Amsterdam and Paris, respectively.

Nevertheless, a willingness by the UK to recognise the concerns of individual EU states and seek to ameliorate them rather than treat them as part of a zero-sum game that is there to be won or lost would likely result in greater engagement and more beneficial terms for them too.

As the controversy over the terms of the draft withdrawal agreement and shorter political declaration on future relations persists, the deal Britain has managed to negotiate appears to be a result that pleases few: its Northern Ireland solution has alienated it from the DUP, while the outline of customs arrangements for the future suggest something far removed from the frictionless trade the government had said it wanted.

Source: Internet Newspapers and Anupsen articles


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