EU could cut UK out of financial markets – Andrew Bailey

EU could cut UK out of financial markets – Andrew Bailey

There are signs the EU plans to cut the UK off from its financial markets, the Bank of England governor has warned.

Andrew Bailey said the City wanted to reach an agreement on financial rules, but would not accept being “dictated” to by Brussels.

Both sides are working towards a March deadline to agree an “equivalence” regime under which each would recognise the other’s regulation.

But Mr Bailey said EU demands had so far been unreasonable.

“I’m afraid a world in which the EU dictates and determines which rules and standards we have in the UK isn’t going to work,” the governor said in his annual Mansion House speech to the City, this year held virtually.

“Is the EU going to cut the UK off from itself? There are signs of an intention to do so at the moment but I think that would be a mistake,” he added.

“We have to state the argument for global standards and markets and openness and if we all sign up to that then there’s no need to go in that direction.”

Financial services – a key driver of the UK economy – were largely omitted from the last-minute Brexit trade deal agreed in December.

As a result the City has been cut off from EU markets since 1 January, something that is already causing the £135bn industry to lose business to hubs such as Amsterdam.

But Brussels says it will not be rushed into decisions on granting access for UK financial firms, as it wants to see how far UK rules will diverge from its own.

It follows fears the UK will adopt a low-regulation Singapore-style model that would undercut the EU.

Mr Bailey said the EU was holding the UK to unrealistically high standards on the issue of divergence, saying it would in effect make the City a “rule taker”.

However, he said that while some UK rules would change post-Brexit, sudden deregulation was not in the cards.

“Let me be clear, none of this means that the UK should or will create a low-regulation, high-risk, anything-goes financial centre and system,” he said.

“We have an overwhelming body of evidence that such an approach is not in our own interests, let alone anyone else’s.”

Despite the current situation, Mr Bailey said that London would “undoubtedly continue as one of the world’s leading if not the leading financial centre”.

Last month Mr Bailey said up to 7,000 finance jobs had so far been relocated from London to rival centres in the EU – well down on predictions of as many as 50,000 losses.

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