Many EU companies depend on London for raising capital; if the EU plays hardball over financial regulation, EU companies would suffer and Barnier knows that, but he is not beyond cutting the EU's nose off.
Think back to 2016, when we were told that Paris, Frankfurt and Dublin were going to take the place of London. This never happened - neither Frankfurt nor Paris can even begin to rival London,which is one of the top three finiancial centres of the world.
Several EU insurance companies have been setting up in London because they can see which side their bread is buttered on.