Bank of England Governor Mark Carney has called for Britain and the EU to recognise each others' bank rules after Brexit or risk a potentially damaging hit to financial services across Europe.
Carney also said in a speech at Thomson Reuters' London office that the BoE and banks had to be ready, simply for contingency reasons, for a "hard" Brexit.
He set a July 14 deadline for all cross-border financial firms operating in Britain to tell the BoE how they would cope with an abrupt EU exit.
Banks, including many from the US and other countries around the world, use EU "passporting" rights to offer their services from London across the bloc, the region's biggest financial centre by far.
But that arrangement is set to end once Brexit pulls the UK from the single market in two years' time, and it remains far from clear what kind of deal will replace it.
Prime Minister Theresa May mentioned the importance of reaching a trade deal with the EU that includes financial services as a "crucial sector" when she triggered the two-year process of Britain's exit from the EU last week.
However, many bankers have said they are not convinced the government will prioritise their industry, with May making controls on immigration a top aim for Brexit.
Carney said he expected financial services to be part of a "bigger deal" on trade between the UK and EU.
And in an apparent reference to signs that US President Donald Trump may undo some of the reforms implemented since the financial crisis, Carney said on Friday that the global financial system was at a "fork in the road".
Governments had to choose between maintaining high standards of regulation and respecting each others' rules, or looking inward with big costs to global trade, he said.
Trump has said that internationally-inspired banking rules are holding back US lending, and has ordered a review of regulation, raising concerns that the global approach to financial regulation will splinter.
"How Brexit negotiations conclude will be a litmus test for responsible financial globalisation," Carney said.
"The EU and UK are therefore ideally positioned to create an effective system of deference to each other's comparable regulatory outcomes, supported by commitments to common minimum standards and open supervisory co-operation," he said.
