On January 1, the European finance sector will lose a major player as Britain begins to chart its own course, regardless of Thursday's last-minute deal in Brexit talks.

The key economic activity was never a part of the drawn-out negotiations between Brussels and London.

British financial institutions will no longer benefit from a "European passport" that has allowed them to pitch their services across the entire 27-nation bloc without supplemental agreements.

Many have therefore had to either move their headquarters to the EU or set up a subsidiary there.

Bank of America moved some activities to Paris, while the new fintech group Bankable chose to relocate to Brussels.

Paris Europlace, which promotes the French capital as a place to do business, estimates more than 3,500 direct jobs have been created there since the Brexit referendum in mid-2016.

Companies that remain based in Britain must prove that EU subsidiaries employ sufficient staff and have the means to do business, to ensure they are not simply "letter boxes" set up to flout EU regulations.

A key question here is the meaning of the word "sufficient", so EU authorities reserve the right to harden criteria at a later point -- creating uncertainty for financial interests that are working hard to create a viable organisational model.

Many financial firms have already had to move some activities or their headquarters from the City of London to the EU
Many financial firms have already had to move some activities or their headquarters from the City of London to the EU AFP / Tolga Akmen

In September, the EU authorised London clearinghouses to continue operating on the continent for 18 months, acknowledging the fact that EU members cannot do without them.

Once that period has expired however, EU authorities have suggested that compensation for goods and services in euros will have to take place within the union.

Further down the road, a key question is whether British financial institutions will still benefit from so-called equivalence decisions.

These exist in many European directives on financial services, and recognise that other countries' regulations are equivalent to EU rules, opening access to the European market.

They would allow many companies based in Britain to conserve some access without having to relocate activities to the continent.

London "has granted a certain number of equivalences to European financial companies," noted Marc Perrone, a corporate lawyer with the Freshfields firm.

But "European authorities have always insisted that 'Brexit means Brexit'. The European position is uncertain therefore, and we do not know to what extent they will grant equivalences," Perrone told AFP.

London might want to ease regulations to maintain its attraction as a global financial hub, in which case the EU would be less likely to consider the British system equivalent to its own.

And European companies operating in Britain could find themselves at a disadvantage since they might have to continue respecting stricter EU rules while British rivals did not, a French financial sector source noted.