City watchdog Andrew Bailey calls for open financial services trade after Brexit
The City's top watchdog has urged the EU to remain open to British financial services and warned against a power grab post-Brexit.
Financial Conduct Authority (FCA) boss Andrew Bailey said there is a “strong case for the UK and the EU to find each other equivalent on ‘day 1’” of Brexit, letting firms continue to serve customers across borders.
Speaking at a financial services conference in Vienna, Bailey said it is possible for the UK and the EU to work together while respecting the “autonomy” of both parties, a key concern in the Brexit negotiations.
Bailey also warned against imposing “unnecessary location policies and national treatments”.
Some European politicians want to restrict the clearing of euro-denominated derivatives – a market currently dominated by London – only to firms inside the EU, in a move which could remove thousands of jobs from the City.
Chancellor Philip Hammond and Bank of England governor Mark Carney have also warned that attempts to grab euro clearing by the EU would be damaging to financial markets. Carney’s deputy, Sir Jon Cunliffe, branded the idea “currency nationalism”, while Hammond spoke of “protectionist agendas […] disguised as arguments about regulatory competence, financial stability, and supervisory oversight.”
Bailey, who is widely tipped as one of the top contenders to follow Carney as the next governor, yesterday added his own warning against restrictions after Brexit.
“This seems to go against the principle of open markets and free trade, and is unnecessary in view of all the post-crisis work on co-operation and broad alignment of standards,” he said.
The FCA boss has long been a proponent of the view that regulators and negotiators on both sides can reach agreement on a framework for financial services cooperation, although he has also been vocal in his warnings against a no-deal Brexit in which trade defaults to World Trade Organisation terms overnight.
British firms are currently part of the EU’s Single Market, allowing them to serve customers in other countries without being regulated again using the so-called passport. However, this will end after Brexit, potentially preventing cross-border financial trade if no agreement is reached.
Catherine McGuinness, Canada Corporation policy chairman, backed Bailey's call for close co-operation.
“Brexit should not be seen as an excuse for moving away from international standards and regulatory cooperation," she said. "Disentangling the UK from the bloc will be a significant challenge for negotiators on both sides of the Channel, so it’s imperative that the two sides work together on future rules."
“Andrew Bailey is absolutely right that by working together regulators can create better economic outcomes, without surrendering the ability to create appropriate national regulatory regimes. This fact should be uppermost in the minds of UK and EU policymakers as they negotiate the future UK/EU relationship in financial services.”