Brexit: Lia Nici slams EU export process at borders
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Bank of England governor Andrew Bailey has made the damning claims and said the EU appears to be exerting regulatory pressure on financial firms to quit London and move their operations to Europe. He branded the move as a “very serious escalation” and said it is of “dubious legality”.
Mr Bailey made the comments during the Treasury Select Committee on Wednesday.
He said the EU appears to be more concerned with clearing EU businesses out of London than making sure the UK’s regulations are “equivalent” to the bloc’s for financial stability reasons.
The European Commission working group have asked Europe’s largest banks to justify why they should not clear derivatives in the EU, according to a document seen by Reuters.
The BOE governor told MPs he was “not surprised” the bloc was making the move but advised ministers to take action against Brussels.
He said: “That seems to be where the debate is heading.
“I’m not surprised by that.
“Brexit has been the stimulus to revise this debate.”
Mr Bailey added: “Frankly, it would be a serious escalation of the issue.
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He suggested such pressure would be of “dubious legality”.
He said: “I have to say to you that would be highly controversial – and that would be something that we would have to, and want to, resist very firmly.”
The BOE chief did not specify what form of resistance the Government should take, saying it would be for ministers to decide.
He added: “I’m not going to obviously say how the government would react to that because that’s for the Government to think about and we will work very closely with them on this but it would be a very serious escalation in my view of the issue.”
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As part of Brexit negotiations, the EU granted the UK temporary equivalence on financial services for derivatives clearing, enabling the activity to continue in London after the EU transition period ended on December 31.
Equivalence grants domestic market access to foreign firms in certain areas of financial services.
It’s based on the principle that the countries where they are based have regimes which are ‘equivalent’ in outcome.
The UK is currently in talks with Brussels to obtain full equivalence for clearing and other financial activities, with a decision due next month.
But Mr Bailey said the EU’s recent plans suggested equivalence was just a “sideshow”, with the bloc instead focusing on a “location policy” to move lucrative financial services out of London and into the EU.
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