Bank of England talks with EU continuing as it urges no-deal Brexit preparation
A top Bank of England official today said talks are continuing with EU regulators to try to persuade them to allow British clearing houses to serve clients on the continent as he warned that job losses in the City will be larger than 5,000 expected by “day one” of Brexit.
Sir Jon Cunliffe said that the British side has done “pretty much done all that we can do unilaterally”, and that it is now in the hands of European agencies to preserve financial stability in the event of a no-deal Brexit.
The Bank has been unusually outspoken in its pleas for the EU to act to authorise central counterparties (CCPs), with some European politicians eyeing London’s dominant industry for clearing euro-denominated derivatives. Derivatives are used by firms to manage risks like currency and exchange rate movements.
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Clearing and related industries account for around 12,000 City jobs, according to an Oliver Wyman report referenced by Cunliffe, in evidence to the Treasury Select Committee.
Cunliffe said that he expects medium-term job losses in the City to far outnumber the 5,000 the Bank expects on “day one” of Brexit, although he added that he has no up-to-date estimates.
“It would be wrong to assume that those day one effects that I gave you will be the effects over a number of years,” he said. “One would expect over a number of years more European-related business to transfer out of the UK into the European Union.”
The Bank has continually urged the government to secure a transitional arrangement with the EU to preserve financial stability. Mark Carney, the Bank’s governor, yesterday wrote to the committee saying the Bank will provide an analysis of how the Brexit withdrawal agreement will affect its remits for monetary policy and financial stability – even in a no-deal scenario.
The Bank will provide the analysis after negotiations between the UK and the EU have finished, although Carney did not provide details of his intentions should no deal be agreed.
The analysis will not attempt to make a judgement on the “long-term impacts of the various end state relationships” on offer, Carney said.
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