The FCA has published a speech given by its chief executive, Andrew Bailey. The speech is entitled Why free trade and open markets in financial services matter.
In his speech Mr Bailey gives an overview of the work the FCA is doing on Brexit and the impact of Brexit on financial services. In relation to the impact of Brexit on financial services Mr Bailey makes a number of points including:
- Brexit does not need to lead to calling into question the fundamental principles of free trade and open markets. Brexit is undoubtedly a very big development, but it should sit within the overall scope of how to arrange the institutions of state to enable trade to happen while maintaining the public interest in stable, safe and fair financial services;
- there is a need to preserve close regulatory and supervisory links with the EU. Looking ahead, strong coordination is a sensible approach to take in order to demonstrate the strength of the system;
- the four key elements of such coordination are: comparability of rules but not exact mirroring; supervisory coordination; exchange of information; and a mechanism to deal with the differences. Added to this is the importance of transitional arrangements being put in place to allow for a smooth transition;
- effective comparability of regulatory standards in financial services is not a new idea and exists around the world in various forms. With the advent of much stronger international standards in the wake of the financial crisis, there is a better chance than before of creating a strong platform of coordination;
- any system requires an approach that allows checking and verification that outcomes are equivalent and sustained and that differences can be resolved without recourse to withdrawing market access;
- cooperation needs to be close in ways that not only avoid irreconcilable differences but also make the commitment to sustained market access credible. Disagreements should be escalated to a mechanism that provides reconciliation; and
- the UK should be prepared to make its supervision more transparent, where appropriate, so that it is always a source of confidence. Exchange of information on an open basis will be important to support this.
In his conclusion Mr Bailey states:
“My view is that if there is a commitment on all sides that the UK and the EU maintain substantially equivalent regulatory arrangements in the future, that it will not be necessary to restrict open markets and free trade in financial services and therefore not necessary to limit the freedom of firms on location. And therefore, I see no reason why we should sacrifice open financial markets and free trade, as an inevitable response to Brexit.”
View Why free trade and open markets in financial services matter, 6 July 2017