Prime Minister Theresa May says Britain would fight hard to preserve the City of London's position as a top global financial hub in talks to leave the European Union.
Earlier the BBC reported that the Bank of England would allow European banks to continue operating without creating expensive subsidiaries after Brexit.
"We value the important role that the City of London plays not just as a financial centre for Europe but actually a financial centre for the world. We want to retain that," May told parliament on Wednesday. "This will be, of course, part of the negotiations on phase two of Brexit."
The EU wants a transition period after Brexit to end no later than the last day of 2020, according to the European Commission's negotiating directives agreed on Wednesday.
That date, coinciding with the end of the EU's seven-year budget period and 21 months after Britain departs the EU, had long been expected as the target end point of the transition.
But this was the first official confirmation that it is the goal of the Union's negotiators.
May had sought a transition lasting around two years. EU chief negotiator Michel Barnier, speaking at a news conference after the EU executive had agreed the terms, said the 2020 deadline was logical and would avoid complications in the next 2021-2027 EU budget period.
The four pages of new directives for Barnier were in line with guidelines issued by EU leaders at a summit on Friday and will form the basis of talks on the transition that he hopes to start next month. He has said in the past he hopes a free trade pact could be ready to take effect in January 2021.
The directives spell out that Britain will effectively remain in EU institutions, bound by all their rules including new ones, while not having a say in their making.
The EU will also offer Britain a non-voting place at some meetings where decisions may affect specific issues and will set up special arrangements for a UK role in setting annual EU fishing quotas.
The directives also spell out more clearly that EU treaties with other countries and international organisations will no longer apply to Britain during the transition period.
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