FCA chief executive Andrew Bailey is calling on regulators to put a memorandum of understanding style agreement in place for the UK’s departure from the EU by March, warning both economies will suffer without one.
Speaking at the Future of the City dinner in London on Monday, Bailey said mutual recognition on regulations would ensure financial services trade continued in a similar fashion after the departure of the UK, which is set to lose its European financial passport without a deal.
Bailey said an agreement would provide “much needed assurance” to firms and markets during Brexit negotiations and prove Britain’s commitment to continued open markets.
He said: “An MoU would be a means for the regulators to be transparent in the more practical issues around implementation, and thus that we are committed to such a period of time being available. This is an important safeguard and a sensible way to underpin financial stability.”
“The EU is a regional trade bloc but I don’t believe that it has ever been part of the objective of the EU to pursue regional free trade and global protectionism. Moreover, there is an extant proposal from the EU which could be a good starting point for UK-EU mutual recognition.”
Bailey again stressed the benefits of the potential deal for the EU, and said central counter-party clearing houses could find themselves in breach of regulation, while the personal data of EU citizens held in the UK was also a factor to consider.
He said: “Like all systems, the UK financial system is exposed to risks. Given its size, complexity, and global interconnectedness if these risks were to materialise they could have a major impact not only on the UK but also on the global financial system. Financial stability in the UK is thus a global public good.”
“Fragmentation of financial markets is not a price worth paying, for either side.”