As a Dutch passport holder who has lived in the UK for 15 years, and raising a family with two daughters who recently started their professional careers in the city, it’s not just the economic and business aspects of Brexit that are important to me, it is the personal aspects as well. There are currently more than two million EU citizens in the UK and many are an integral part of London as a financial center and will have similar concerns about the lack of certainty.
On Thursday, July 6th, Andrew Bailey, Chief Executive Officer of the Financial Conduct Authority (FCA), presented a special to a packed auditorium in Canary Wharf, London titled, Brexit: What Matters For Financial Services.
Bailey gave an insightful overview of the work that the FCA is doing on Brexit and the impact of Brexit on financial services. Below are some highlights and clips from the discussion.
Part of the global economy
In his opening statements, Bailey addressed the FCA’s role in Brexit:
“Quite simply, our job at the FCA is to get on with it, to roll our sleeves up and play our part in implementing the decision made by the people of this country to leave the European Union, and what goes with it.
“Open markets in financial services, freedom of location and free trade are important to the functioning of the global economy. Well integrated financial markets support economic growth and employment. They reduce the cost of access to financial services by encouraging competition.”
The FCA’s work on Brexit
Bailey outlined three ways the FCA is preparing for Brexit:
“First, we are ready to provide whatever technical advice is needed to support the Government in the negotiations ahead. Second, we are working with authorized firms to understand their plans for the future of their cross-border operations into the EU, and from the EU to the UK. Third, we are working with the Government on the Repeal legislation.”
All of this is to “create a clear and functioning regulatory regime on the day that the UK ceases to be a member of the EU, and thus to give certainty to all interested parties.”
Bailey said, “The FCA gains significant benefit from our co-operation with other regulators in Europe and internationally. This allows us to share information, intelligence and best practice – and to deliver as effective supervisors day-to-day.
“A retreat from international engagement would be a big mistake, and we are not doing that.”
Implementing Brexit and the impact on financial services
Bailey went on to answer some questions regarding what this will mean for the financial markets.
“Does Brexit have to mean abandoning the benefits of free trade and open markets in financial services? It should not.
Does it require membership of the Single Market to get the benefits of free trade with the EU? No.
Does Brexit mean abandoning the use of regulatory co-operation to ensure sufficient alignment of standards and outcomes so that open markets can prevail? No.”
“Brexit does not need to lead to calling into question the fundamental principles of free trade and open markets. Brexit is undoubtedly a very big development, but it should sit within the overall scope of how to arrange the institutions of state to enable trade to happen while maintaining the public interest in stable, safe and fair financial services.
“We have built effective structures around supervisory colleges in the EU and globally, and at the FCA we have over 100 memorandums of understanding with other regulators around the world. We should continue this work with a strong commitment. This is another lesson of the financial crisis that we should not jettison.”
Brexit should not mean an end to open financial markets
Bailey finished his speech by arguing, “If there is a commitment on all sides that the UK and the EU maintains substantially equivalent regulatory arrangements in future, it will not be necessary to restrict open markets and free trade in financial services and therefore not necessary to limit the freedom of firms on location. And therefore, I see no reason why we should sacrifice open financial markets and free trade, as an inevitable response to Brexit.”
A Q&A followed the talk which was moderated by Axel Threlfall, Editor-At-Large at Reuters. Simon Jack from BBC News asked about a Brexit transition period and what that might look like.
“The transition period is important. Since we as authorities are asking firms to make contingency plans for every other variable you could possibly think of, of course it would be contradictory if we didn’t do the same for Brexit. So we do, that’s a reality.
“Where I think it becomes tricky is that there is a very clear risk with an absent transition period, firms will hit the point in which they will have to pull into effect their transition plans before they know the outcome of the negotiations… because we are talking here about a disruption to markets and not just those in the UK, so it seems to be in everybody’s interest to have that.”
Other questions followed from the likes of Reuters, Financial Times, Schroders, Blackrock. Axel closed proceedings with a simple, but important question to Bailey:
“The financial services sector, they need rules. We all know how many extra lawyers are being brought on. Is it going to be done on time?”
Bailey’s response: “We have to. This is why we have had to gear our operation up to that rapidly, as we are faced with having to go through a large volume regulation rules but it’s clearly essential.”
below and view Reuters coverage