Banks don't need to quit UK post-Brexit, says watchdog boss
Finance firms should not be forced by regulators to change location after Britain leaves the European Union in 2019, Andrew Bailey, chief executive of the UK's Financial Conduct Authority told a Reuters Newsmaker event yesterday.
Banks, insurers and asset managers based in Britain are already making contingency plans to shift some operations to remaining European Union member states after Brexit takes effect in case access to the EU single market is closed off.
But Mr Bailey said Britain and the EU were in a position to preserve free trade for financial services, meaning that such relocations need not happen.
"Firms should be able to take their own decisions on where they locate, subject to appropriate regulatory arrangements being in place which preserve the public interest," he said in his first major speech on Brexit since Britain triggered the formal EU divorce proceedings in March.
"Authorities should not dictate the location of firms," Mr Bailey told an audience in Canary Wharf, home to some of the world's biggest banks.
Future financial-sector relations between Britain and the EU should be based on "mutual recognition" or regulatory co-operation, "but not exact mirroring" of rules.
Frankfurt, Paris, Amsterdam, Luxembourg and Dublin are all vying for a slice of Britain's financial services industry after Brexit. Mr Bailey said such competition was good. But he also said Brexit should not be used as an excuse to restrict the ability to have open markets and freedom of location.
"The routes exist to come out with sensible outcomes on this. When I hear people say firms need to relocate in order to continue to benefit from access to EU financial markets, I start to seriously wonder."
France and other EU countries, for example, want the clearing of euro-denominated derivatives, which London dominates, "located" within the EU after Brexit.
"It does not require a location policy," Mr Bailey said.
Joint oversight with the EU of clearing houses in London is "something that is very clearly preferable to the cost and risk that is introduced by a location-based policy".
Such joint oversight was already working well between the UK and United States regulators in clearing, he explained.
Mr Bailey dismissed talk in the EU that, given the dominance of Britain's financial services sector, the largest in Europe, there should be specific rules for the UK, rather than the existing general regime for recognising non-EU financial firms.
"I do not accept that," he said.
Non-EU financial firms from the United States, Singapore and elsewhere can offer their services in the EU if their home regulation is deemed by Brussels to be "equivalent" or as tough as the bloc's own rules.
This regime should be applied to Britain in the same way, he added. (Reuters)