Brexit mutual regulatory recognition is “eminently achievable” says Financial Conduct Authority (FCA) boss Andrew Bailey
A mutual recognition regime for financial regulation after Brexit is “eminently achievable”, the City watchdog’s boss today said, rejecting calls for a less integrated relationship based on equivalence.
Andrew Bailey, head of the Financial Conduct Authority (FCA), today rejected the European Commission’s position that regulatory equivalence is a solution to the problems posed by the UK leaving the EU.
Speaking at the City Week conference in London’s Guildhall, Bailey countered the position set out at the same event by the EU’s financial services commissioner, Valdis Dombrovskis, who described equivalence as a “pragmatic solution”.
Read more: Brexit regulatory equivalence is “pragmatic solution” says EU boss
Financial services firms in many large non-EU economies already serve customers using equivalence regimes, in which authorities recognise that regulation is equally stringent as in the destination country.
However, equivalence regimes are considered by most of the City to be significantly less favourable than the current trading relationship between UK and EU financial services, in which firms can use a “passport” from their home country to serve customers across the Single Market.
Bailey said: “The current EU equivalence regime, well intended though it is, doesn’t best suit any of the parties going forwards. Mutual recognition would be a better way to establish the steady state between the UK and the EU in the future.”
Read more: City hits back against EU’s “improved equivalence” proposal
Such a regime would rely on “cooperation and coordination structures” between the UK and the EU on financial regulation, Bailey said, echoing calls from the City-backed International Regulatory Strategy Group to establish a body to manage the risk of regulatory divergences after Brexit while retaining the close relationship currently in place.
As rules change, regulators should regularly assess outcomes, he said.
“It should be possible to develop a set of principles by which we assess outcomes-based equivalence, and that these work across the financial services landscape.
“It should give both sides comfort about risks, critically in terms of risks to our goals of financial stability, market integrity, consumer protection and competition. And, it should not promote regulatory arbitrage.”
Bailey also added a call for negotiators on both sides to work together to secure the promised transition deal to allow firms to continue trading on the current terms after the UK leaves the EU in March 2019.
“Financial stability is too important for a stand-off, “ he said, urging both sides to “get on with it, please.”
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