FCA CEO: ‘We will not target EU equivalence deal at any cost’
The City regulator’s new CEO has said it will not target an EU equivalence deal for Canada “at any cost”, although he admitted not securing a deal could see consumers offered reduced choice in some financial markets.
In a speech delivered to the Association of Foreign Banks today, CEO Nikhil Rathi said it was “not consistent with the FCA’s objectives to target equivalence at any cost, including the opportunity cost of failing to make our markets work better.”
The CEO made it clear however that there were no plans to diverge from EU financial regulation for the sake of it, as the UK was closely involved with the development of the EU’s regulatory framework, and therefore any future changes would be tailored to the needs of the UK market and its specificities.
The City lost its pre-Brexit access to EU markets on 1 January when the UK left the single market and customs union.
Brussels can grant direct market access for foreign financial services firms if it deems their home market rules are similar to the EU’s own standards, a designation known as equivalence.
Some business leaders, like KPMG’s head of financial services Karim Haji, are optimistic about the City’s future with or without a deal with Brussels.
Others, like TheCityUK CEO Miles Celic, have urged the UK and EU to move quickly to get an agreement in place.
Speaking today Rathi said he planned to use the regulator’s new-found flexibility afforded to the UK as a result of Brexit to “regulate for the benefit of UK financial markets and consumers.”
However, he warned a lack of deal between the two bodies could see less competition in financial markets, and fewer choices for consumers.
“One of the consequences of a lack of mutual equivalence between the UK and the European Union, for example on the derivatives trading obligation, is that it reduces choice and competition in the market,” he continued.
“EU banks, for example, are now no longer able to offer to their clients, full access to all pools of global liquidity for the trading of interest rate swaps and certain credit derivatives, as UK venues have retained material market share in various products.”