The FCA has updated its progress on Brexit, saying it is on course to be ready for a hard exit from the EU and that it is important for both sides to coordinate to avoid disruption in the event of a no-deal situation. Its preference, however, is a permanent arrangement post Brexit that would allow for close alignment and equivalence with the EU, without the UK being a rule taker.
FCA chief executive Andrew Bailey set out the FCA’s latest views on Brexit last night during a speech at the City Banquet held at Mansion House. On the issue of a smooth transition or hard exit, he said: “We are prepared for a range of outcomes including an implementation period that smooths transition and a hard and sudden exit. It’s a lot of work, but I think we are on course. . . So I think we can handle it. But, as I have said before, we urgently need the engagement of our EU counterparts so that we can put in place memorandums of understanding (MoUs) and other important practical arrangements. This is not just a self-serving UK point; it applies to both sides. MoUs will support cross border supervision of firms and data sharing will support our ability to jointly oversee markets.”
Bailey said this type of regulator-to-regulator coordination is essential to minimise disruption in a no-deal situation, but noted the FCA’s preference for a better deal. He said: “Of course, there is a broader solution to removing cliff edges which is for both the UK and EU to commit to taking reciprocal equivalence decisions on each other’s regimes, as early as possible. Our work to onshore the EU rulebook demonstrates that on day one, the UK will have the most equivalent framework to the EU of any country in the world.”
Implementing the EU rulebook would maintain reciprocal equivalence across the EU, an option favoured by the EU and underlined by Bailey: “My own view is that the principle of proactively recognising equivalence makes a great deal of sense, and is consistent with the arguments put forward by the EU in the context of Brexit in terms of not constraining domestic choices. So, it ought to have broad support, except probably amongst those who take a more mercantilist view and are prepared to sacrifice the principle of open markets, with which I strongly disagree.
“I think that if we appropriately temper our approach to the domestic side of things by a commitment to seeking broadly equivalent outcomes, and our opposition to any suggestion of a race to the bottom – a bonfire of rules and the like – protections can be made to work quite effectively.”