Andrew Bailey, Chief Executive of the Financial Conduct Authority (FCA), spoke at Bloomberg in London in September 2019 about the financial services industry’s preparations for a no-deal Brexit.
He began by stating that the FCA will not be making any public statements regarding its opinions on Brexit. However, Mr Bailey said his organisation is preparing for a range of different outcomes, commenting that “in terms of contingency planning it would be foolish not to [prepare for no-deal]”, indeed he said that the bulk of the FCA’s preparations were for a no-deal scenario simply because that would be the Brexit outcome that would involve the biggest changes in a short time span.
The FCA chief said the regulator would continue to work closely with EU regulators after Brexit, and he said he could see no reason why the UK’s exit would affect access to the London financial markets. Indeed, the FCA has already signed new cooperation agreements with the EU markets, insurance and banking authorities and these agreements will take effect should there be a no-deal outcome.
Noting that both the FCA and firms that may be affected have already carried out a lot of Brexit contingency planning, Mr Bailey said:
“The upshot of this progress and improvements in preparedness is that the Bank of England has concluded that the appropriate assumptions to underpin a worst-case scenario would now be less severe than those of a year ago. But a worst-case scenario remains just that, even though we have worked to mitigate most of the potential disruption, we cannot provide the assurance that there will be none.”
The FCA chief then mentioned the Temporary Transitional Power, which is designed to ensure that UK-based firms don’t experience a sudden change in their regulatory obligations when opening their offices on the morning of November 1. The Power gives the FCA the ability to delay or phase changes to regulatory requirements made under the EU (Withdrawal) Act 2018. In the event of a UK exit from the EU without a deal or a transitional period, the provisions of this Power will apply until at least the end of 2020.
Mr Bailey mentioned that some EU states have arrangements in place that will allow UK-based firms to continue to trade in other European countries, even though the passporting regime may end abruptly on October 31 this year.
Summarising the present situation, the FCA chief finished his speech by saying:
“We will work with firms to make sure their contingency plans are executed effectively. We will continue to engage closely with our EU counterparts, and I hope we can commit to take the necessary joint activity to deal with issues that arise. In our view, the UK and the EU should be able to find each other equivalent on day one by virtue of having the same legislation and well-established supervisory approaches.
“We co-ordinate closely with the Treasury and the Bank of England. As I said earlier, our experience of the financial crisis has imprinted this sort of work firmly in our DNA. And, we will maintain an active programme of communications, for firms and for the public.
“So, in short, and to end, we have made considerable progress, but we do not underestimate the task ahead.”
Also in September 2019, the Economic Secretary to the Treasury and City Minister, John Glen MP, addressed the Annual Dinner of banking trade association UK Finance. Regarding Brexit he said:
“The Prime Minister has been clear. We cannot go on like this. No more dithering, no more delay. We must respect the result of the referendum. Leave the European Union on 31 October. And take the country forward in a positive direction.
“The financial services industry is well prepared for Brexit; and it will continue to thrive. Ahead of 31 October, we will continue to do all that we can to ready the sector for all scenarios.”
Any firm hoping that Brexit will lead to a large-scale repeal of financial services legislation is likely to be disappointed, however Mr Glen promised to look again at the regulatory system once the UK has left the EU. Mr Glen commented:
“The Chancellor and I have heard your representations and will be carefully and urgently considering your suggestions over the coming months. You’ve already told us that there is a need for greater “air traffic control” to manage the cumulative impact of regulatory change emanating from different sources.”
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