The chief executive of the Financial Conduct Authority (FCA) this afternoon called for regulators to continue with sharing of information and cross-border collaboration whatever the outcome of the thorny Brexit negotiations presently underway between the EU and the UK.
Andrew Bailey, pictured below, was addressing independent think-tank for central banking, economic policy and public investment Official Monetary and Financial Institutions Forum (OMFIF) at Chartered Accountant’s Hall in London’s financial district, the City.
While Bailey emphasised that, on Brexit, “our job at the FCA is to roll our sleeves up” and play its part in implementing the decision made by to leave the EU, he argued that in the UK, “we have the basis for effective open financial markets and free trade supported by the regulatory reforms post-crisis”.
There was, he said, a threat to achieving that outcome in the form of reactions to Brexit, adding that “trade theory tells us that such a threat is bad all round, not just for the UK”.
A better route, argued Bailey, would be to entrench open markets and free trade, and that for financial services, strong regulatory standards are an important pre-requisite.
Bailey conceded that international or global regulatory standards are “a patchwork at best”, most obviously present in the Basel Accord as augmented over time.
Elsewhere — “particularly in the world of financial conduct, where wholesale markets are the most relevant to trade” – they are more absent, he said, but that regulators need to find “agreement on principles” to form the basis for the negotiation of solutions, adding that time was pressing, because of Brexit: “To state the blindingly obvious, time is of the essence,” as Bailey bluntly put it.
The overall objective of regulatory standards in financial services is to support the delivery of financial stability, consumer protection, said Bailey, and open, innovative financial markets which enable growth and prosperity.
“This means that where markets are global/cross border, we should cooperate to ensure frameworks are consistent in terms of outcomes and that opportunities for regulatory arbitrage are minimised,” he argued.
Where markets are local, regulators should share “best practice and promote common approaches wherever appropriate”.
Referring back to the global financial crisis of 2008, he said that the industry has had a “painful lesson” as to the need for shared information and collaboration among regulators.
“We know that EU withdrawal has potential risks for disruption to financial services for the UK, EU and even globally,” he said in conclusion.
“Some of these financial stability effects arise due to so-called cliff edge risks, but by working closely together as authorities we can minimise these risks and support a transition to a new relationship between the UK and the EU.
“To help achieve this, we need to have cooperation. Regulators must work together to protect market functioning and integrity. Given the high degree of integration in financial markets, regulatory authorities should be able to share information without obstruction.
“Authorities should explore mechanisms to support greater information sharing where appropriate given the degree of cross border business or to improve the functioning of the supervisory oversight system.”