The FCA has published a speech given by its chief executive, Andrew Bailey. The speech is entitled The Future of the City. In his speech Mr Bailey discusses Brexit and focusses on the transition period and also the position post Brexit (which he calls the steady state future).
Mr Bailey states that by the end of March there needs to be a joint commitment by the political authorities to a well-defined transition period which will create the space and support for the regulators to work with firms and political authorities to put practical solutions into place.
As part of a co-ordinated solution for the transition period, Mr Bailey states that he hopes that the respective regulators can put in place a Memorandum of Understanding (MoU) to give effect to a stable and orderly transition which would acknowledge that firms are planning for a transition period to be in place. Mr Bailey adds that the PRA has taken an important step in the direction of contingency arrangements by introducing the plan that it would use interim permissions as a means to deal with the risk that firms are left without authorisations without due warning. The PRA believes that this is an important safeguard and a sensible way to underpin financial stability. Mr Bailey states that he is grateful to the UK Government for committing to introduce the secondary legislation needed to put such an arrangement in place.
In terms of the post Brexit landscape, Mr Bailey refers to the approach that the EU took to the Transatlantic Trade and Investment Partnership (TTIP) negotiations with the United States, where the EU pursued a trade agreement which included provision for financial services. He notes that the United States was not ready for such a move but that this does not take away from the fact that the EU proposed such an arrangement. Mr Bailey adds that the “European Commission drafted a TTIP chapter on financial services. So, it turns out that it can be done, and moreover there is an extant proposal from the EU which could be a good starting point for UK-EU mutual recognition.”
Mr Bailey also states that the principles for mutual recognition would look a lot like the ones that the PRA already uses to authorise the branches of banks from outside the European Economic Area, namely broad equivalence of regulation in terms of outcomes, supervisory co-operation and good information sharing. In addition, a robust dispute resolution arrangement would have to be added which Mr Bailey thinks is possible.
View The Future of the City, 5 February 2018