The governor of the Bank of England has accused the EU of applying unreasonable and unfair standard to the City of London and warned Brussels not to get involved in “regional arguments” over financial access.
In a speech to City grandees at the annual Mansion House event on Wednesday evening, Andrew Bailey argued that an open and connected financial system would benefit both the UK and EU. He urged Brussels to grant so-called “equivalence” rulings to the UK, which would allow finance firms in London to serve European capitals from UK offices.
“The public goods of open economies, an open financial system and the stability of that system are global, not regional, in nature,” the governor said in his speech. “The UK is one of the world’s largest global financial centres, and its financial stability – as the IMF have reminded us – is therefore a global public good.”
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UK financial services largely lost access to European customers on 1 January after Brexit came into effect. The City of London is lobbying Brussels for equivalence rulings that would allow UK firms to regain access but EU authorities have so far been reluctant.
Bailey said it was “reasonable” to assume that common global standards shared by both the EU and UK on finance should make granting access simple. But he said the process “has not been straightforward.”
“The EU has argued it must better understand how the UK intends to amend or alter the rules going forwards,” Bailey said. “This is a standard that the EU holds no other country to and would, I suspect, not agree to be held to itself.”
The governor said Brussels either wanted Britain never to change its rules or to do so only with permission from Europe. The first position was “unrealistic, dangerous and inconsistent”, he said. The second was “not acceptable” given the size of the UK’s financial sector.
“As the world moves on, so the rules need to adapt,” the governor said. “If they do not, we will be heading for trouble.
“The key point here is that good practice means that authorities should be transparent at the time in explaining rule changes, and those changes should be consistent with international standards where appropriate.”
Bailey repeated his belief that the UK must not become a “rule taker” on finance post-Brexit. Britain was committed to maintaining high standards even if it diverged from Brussels in the letter of the law, he said.
“None of this means that the UK should or will create a low regulation, high risk, anything goes financial centre and system,” the governor said. “We have an overwhelming body of evidence that such an approach is not in our own interests, let alone anyone else’s.
“We have an opportunity to move forward and rebuild our economies, post Covid, supported by our financial systems. Now is not the time to have a regional argument.”
Bailey’s comments came as new figures showed that Amsterdam had overtaken London as Europe’s premier share trading hub post-Brexit. The data highlights the impact of Britain’s exit from the EU on its financial sector.
Many in the city fear the EU could withhold equivalence rulings as a means of forcing more business out of the UK and into the bloc.
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