BoE's Bailey Warns against UK Becoming EU "Rule Taker" on Financial Services

Image © Pound Sterling Live, Still Courtesy of Bloomberg TV.

The Bank of England's Governor Andrew Bailey told MPs it was reasonable to assume the EU and UK could reach a deal on financial services by the end of March.

But, appearing before Parliament's Treasury Select Committee, Bailey said he doesn't expect any future financial services deal to achieve full equivalence.

Indeed, he appeared intent on pushing back on the idea: "it is a very bad place to end up if the UK becomes a rule-taker from the EU on financial services," he said.

Bailey's comments comes as London-based firms lose the right to trade in euro-denominated assets, with Brexit meaning such businesses must now be executed inside the European Union.

"The FCA continues to view the agreement of mutual equivalence between the UK and EU as the best way to avoid disruption for market participants and avoid fragmentation of liquidity in DTO products," the Financial Conduct Authority said in a statement.

But Bailey said "if the price of [equivalence] is too high ... We can't just go for this whatever."

Bailey said the fragmentation of financial markets is likely post-Brexit, but it is unlikely that liquidity issues would occur and if they did it would be possible to manage them.

According to the Bank of England Governor, up to 9000 finance jobs have been lost to the EU since the vote for Brexit, a number some commentators point out as being significantly lower than the forecasts made back in 2016.

Bailey welcomed the just-signed EU-UK trade deal, saying it is critical that the UK sees stronger conditions for investment after COVID, and the deal will support that.

"The EU trade deal means there is grit in the mechanism of trade, in terms of non-tariff barriers," said Bailey.