08 May 2019

Financial Times: Regulator urges post-Brexit deal for City of London

The bookies’ favourite to be the next Bank of England governor has a stark message for the government and its efforts to strike a compromise Brexit deal: any agreement with Labour on a customs union will do nothing for the UK’s all-important financial services industry.

“An agreement on a customs union would tie down the goods model, but it wouldn’t tie down the services model,” Andrew Bailey, chief executive of the Financial Conduct Authority, told the Financial Times.

“We’ve got to settle these issues well before negotiation [with the EU on the future relationship] . . . we have to have these issues on the table and in people’s minds.”

The intervention by the UK’s chief regulator on financial conduct comes as the Conservatives and Labour struggle to finalise a compromise Brexit deal that could win the support of parliament. A significant part of the talks has been focused on Labour’s proposal for a permanent customs union between the UK and the EU covering trade in goods.

The comments by Mr Bailey reflect frustration in the City that the services sector has been neglected by the government in its Brexit negotiations, prompting many big employers in London to shift resources overseas. [...]

In his interview with the FT, Mr Bailey stressed that one main reason to resist being a Brussels’ rule-taker was the need to avoid the more dirigiste regulatory approach that the EU, unadulterated by British influence, may take in the future.

That approach, he said, was likely to hold back any attempt by EU financial hubs, including Paris, to become effective challengers to London in wholesale markets such as investment banking.

“I don’t think a codified system of detailed rulemaking . . . is an obviously good way of developing those markets,” said Mr Bailey. It was no coincidence, he added, that the UK and US had fostered strong capital markets on the basis of less interventionist regulatory regimes.

Full article on Financial Times (subscription required)

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