The House of Lords’ EU Financial Affairs sub-committee has published the transcript of the oral evidence given by Sir John Cunliffe, Bank of England (BoE) Deputy Governor for Financial Stability, and Sam Woods, BoE Deputy Governor for Prudential Regulation and PRA CEO, at an evidence session on 1 November 2017.
Among other things, key points discussed include:
- the contingency plans requested by the BoE from banks and insurance companies suggest there could reasonably be a day 1 movement of around 10,000 jobs, which represents less than 1% of UK financial services jobs. However, the big question is the path that is set for the longer term, which depends quite fundamentally on the kind of deal that is struck;
- from a financial stability perspective, it is important for the BoE that firms know where they are going, where they have to go to, and that they have the time to get there in an orderly way. If there are any problems that firms cannot solve themselves, answers will need to be provided. Firms need certainty on contract continuity or data and how they can continue to provide services after Brexit. The point at which that certainty arrives, and how that affects their planning, will be different for each firm;
- most institutions that are doing significant activity in terms of establishing a stronger or new EU27 base will start to operationalise these plans from Q1 2018. UK banks and insurance companies that are affected by Brexit have been approaching regulators in the EU27 jurisdictions (primarily in Germany, Ireland and France, and one or two smaller countries) regarding authorisation. Some authorisation applications have already been submitted. Consistent with this is the ongoing intensive engagement between the PRA and fellow regulators about how to manage restructurings as they occur, given the shared objective of safety and soundness; and
- if, after Brexit, continued preferential market access arrangements were agreed for certain parts of financial services between the UK and the EU27, a natural counterpart of that would be a kind of successor to the current EU institutional and regulatory architecture for supervisory co-operation, notably the Joint Risk Assessment and Decision process. Any successor to that regime could contain the same substance, but would need a different overarching architecture, which could be captured in the financial services chapter of a free trade agreement.