Brexit Rules Require Similar Impact Across Europe, FCA Says
(Bloomberg) -- Financial rules should be devised to have a similar impact on markets across the U.K. and European Union after Brexit for the benefit of consumers and businesses, according to a senior executive at the Financial Conduct Authority.
Nausicaa Delfas, recently appointed executive director of international at the U.K. financial-services watchdog, said an accord that would maximize both market access and benefits to consumers needs to have certain criteria. These are the ability to do cross-border business, based on consistent global standards that both sides could influence, regulatory cooperation, and the ability to recruit and retain skilled workers, she said.
“What matters more is not what road we take, but what that final destination is,” she said in a draft of a speech at Bloomberg in London on Thursday. “As long as the U.K. and the EU maintain a commitment to protecting consumers and to strong, open markets, there is no reason this cannot work in practice.”
While the U.K. and EU will have equivalent regulatory regimes on Brexit day with an implementation period, the issue thereafter becomes one of managing the divergence of the two rulebooks. Speaking to lawmakers this week, Bank of England Governor Mark Carney underlined that to preserve financial stability in the region’s financial hub the U.K. authorities need the freedom to set tougher requirements than those of the EU.
Delfas’s call for “common outcomes” comes after the government last week published its White Paper on the future relationship with the EU, proposing that the two sides grant access to each other’s markets on the basis of new, broadened equivalence arrangements. The government rolled back on some of the plans after criticism lawmakers within her own party.
“We have to look at what is the outcome that these rules were intended to achieve and are these outcomes achievable in some other way?” Delfas said in an interview with Bloomberg, referring to financial regulations. Ensuring rules have a common impact “is a clearly achievable aim,” that’s in the interests of consumers, companies and markets in the EU and the U.K., she said.
Delfas, who was promoted to her current role in February, said it was up to companies to ensure they are ready for all eventualities, including the U.K. leaving without a deal. For their part, the U.K. authorities will give European firms temporary permission to continue their business as before. They will be given a time period -- a landing slot, she said -- in which to submit their applications for authorization, with the first of these expected to be “later in 2019.”
Delfas also added her voice to calls by the U.K. authorities for the EU to act to ensure financial contracts are honored after the U.K. withdraws. With the details of a deal still uncertain, the FCA and the BOE have become increasingly vocal about the need to avoid financial-stability risks when the U.K. leaves next March.
“Where any of these contracts extend beyond March 2019, the U.K. and the EU must, together, create contractual certainty, either through an implementation period or by some other means,” she said. If this is not done, “insurers may not be permitted to pay out claims on policies, and derivatives users may not be able to manage the risks of their positions,” Delfas said.
Separately, in a notice on preparedness, the EU said there doesn’t appear to “an issue of a general nature linked to contract continuity,” because obligations can continue to be honored after withdrawal. However, each contract must be looked at separately, it said.
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