The European Union official responsible for financial services regulation has warned of "clear limits" to the relationship between the United Kingdom and the bloc once Brexit takes place.
European Union financial services commissioner Valdis Dombrovskis said that while "equivalence is not perfect" but that it offered a way forward.
At issue are £96 trillion (€110 trillion) of derivatives and tens of millions of insurance policies that United Kingdom regulators say might be thrown into disarray because firms could lose their ability to fulfil agreements with clients.
On the implementation of mutual recognition, Bailey said: "We can start by recognising that our regulatory frameworks are equivalent on day one of Brexit". Chancellor Philip Hammond last month called the system "wholly inadequate" for the finance sector.
Once the United Kingdom leaves, those permissions will likely fall away, leaving firms unable to service cross-border contracts.
Financial firms in the United Kingdom and the European Union must prepare for all possible outcomes of the Brexit negotiations, including the risk of a divergence in supervision that could affect the bloc's decisions on granting United Kingdom -based firms regulatory "equivalence", a senior EU official warned Tuesday.
The financial industry has proposed possible solutions, including so-called grandfathering of contracts so that they can run to maturity under existing laws.
Andrew Bailey, chief executive of the Financial Conduct Authority, spoke Tuesday about the importance of open financial markets post-Brexit.
Bailey warned Brexit risks were not limited to the UK.
"As Vice President in charge of financial stability, my message is that all parties - firms and supervisors - need to continue their work to prepare for all scenarios", Dombrovskis said.
While the United Kingdom is prepared to act alone where it can, such an approach is "distinctly second-best" to a joint solution, he said.
"Let's get on with it, please", he said.