BoE deputy warns against ‘bonfire of the regulations’ after Brexit
Supervisor cautions on push for more competitive banking regime
The UK’s top banking supervisor has warned against a “bonfire of the regulations” after Brexit, despite Eurosceptics calling for a more competitive regime when Britain leaves the EU.
Sam Woods, deputy governor of the Bank of England, defended UK regulation in an interview with the Financial Times, pledging to “maintain standards of resilience in the financial sector at least as high as those we have today”.
His comments come as relations between those fighting for a hard and soft Brexit become increasingly hostile. Eurosceptic backbenchers were reported over the weekend to be preparing a coup to remove Mrs May from office if she were to push for a customs union. The prime minister faces a tough week as her fractured cabinet meets twice to discuss the next step in Brexit talks.
Brexiters also led an attack on the Treasury at the weekend, claiming it was “fiddling the figures” to persuade Theresa May to stay in an EU customs union. Lord Gus O’Donnell, former head of the civil service, said the suggestion they were manipulating Brexit figures was “completely crazy” and accused Brexiters of “selling snake oil”.
The EU last week pledged to penalise the UK if it watered down financial services rules to undercut the bloc after Brexit, as some prominent Brexiters have advocated.
Mr Woods said: “It is obvious that our EU colleagues, or some of them, have a fear that somehow we will loosen regulation.”
Citing the UK’s “ringfencing” reforms that force lenders to separate their retail businesses from investment banks, and a tough accountability regime for executives, he added: “I think the idea that we would want to be sub-EU standard doesn’t bear scrutiny. If you look at ringfencing, if you look at the Senior Managers Regime: in areas where there is scope to go further [than EU rules], we have often done so.”
Brexit poses key questions as to the future of regulation in the UK. Some see it as an opportunity to cast off overly burdensome Brussels rules, while others argue it is important to tack closely to those rules in order to be deemed “equivalent” and retain access to the single market in the absence of the so-called passport that enables financial companies to sell products and services seamlessly across the bloc.
With no clarity yet on whether a transition deal might be secured, the City is having to plan for the worst, moving jobs and operations to the continent in order to retain the passport. That exodus could start as early as March, the BoE has previously predicted, amid estimates that 10,000 jobs could migrate on day one of a hard Brexit.
But Mr Woods said the central bank would back a deal during a Brexit transition period through a “regulatory underpinning”, even if an agreement was not legally finalised, to give breathing space to thousands of companies in the UK and the EU27.
“It would be a bit absurd if the governments agreed a transition period and that got then frustrated by firms feeling they had to move faster because they were worried about what the regulators were going to do,” Mr Woods said.