Bank of England deputy recommends ‘British approach’ to post-Brexit financial regulation

Britain's financial regulations should be just as strict following Brexit, but more power should be handed to regulatory bodies to create “dynamic” rules, Sam Woods, a deputy governor of the Bank of England, has said.

Read more: EU officials mulling post-Brexit financial reforms

Woods, who is also chief executive of the Prudential Regulation Authority (PRA), told a conference in Switzerland that “becoming a rule-taker” from the EU “would be undesirable”.

However, he said “there is no reason to be very alarmed” if the “future relationship with the EU takes a form that means we stick with a system which looks exactly like what we have today,” so long as Britain has some control over the rules.

The deputy governor’s comments follow disapproving noises from Andrew Bailey – chief of the Financial Conduct Authority, and widely tipped to be the Bank’s next leader – over the idea of the UK joining a customs union, which the Labour party is demanding in its ongoing Brexit talks with the Conservatives.

Woods also argued against the idea that Britain could deregulate its financial sector to increase business once it leaves the EU.

“This, needless to say, would be anathema to the Prudential Regulation Authority and to all of us who have spent the last decade repairing the financial system,” he said.

He said the EU model of regulation “is radically different from the approach the UK has taken when left to its own devices,” with emphasis on primary legislation rather than regulators with rule-making powers.

Woods suggested the UK should use “an existing British approach, in the form of the model adopted for introducing the SMCR” – the Senior Managers and Certification Regime which covers people working in financial services.

Regulators received “considerable discretion in filling in the detail of the framework,” Woods said, “including what functions required approval, the content of the conduct rules, and the detailed systems and controls requirements that apply to firms.”

Read more: Bank of England boss warns against weakening regulation post Brexit

In a talk on the “style” of UK regulation after Brexit, Woods said: “We can assure foreign banks’ chief executives that we have no plans to upgrade our regulatory dress code to white tie-only, and we can assure our colleagues in the EU that we have absolutely no desire to take off our clothes.”