The UK government must outline its intentions for post-Brexit financial rules to avoid a “mess” in financial markets, the head of the country’s financial services watchdog told MPs last week.
Speaking to the Treasury Select Committee, the Financial Conduct Authority‘s Andrew Bailey called for clarity on how Britain will exit the EU, what the new trading arrangements will be, and how to get from one to the other.
“Our interest is that on the day after Brexit we have a rulebook that works. If we don’t, then we are in a mess. Getting from here to there is not quite as straightforward as it is sometimes presented,” he said.
Bailey said it was down to the government how to clarify the access it hoped to achieve with the EU, but that “as a feature of life, it is better to leave knowing where you’re going”.
FCA chairman John Griffiths Jones, also at the meeting, added it is important to understand the likely relationship between the UK and the EU so as to avoid a “cliff edge” when EU rules are scrapped and an unknown set of post-Brexit rules come into force.
As a major financial centre, the UK must also have a say in the financial rules it applies, Bailey said.
The regulators called for a transitional setup because it will take a long time for banks to update their IT systems to cope with a change of rules.
As a long-term solution, Bailey recommended a set of global financial standards be created, which would be adaptable to local conditions by individual governments.
“We would be in a better place if we had consistent global standards – a lot better – because frankly global free trade in financial services is something worth having, and the nearer we are to global free trade, the better,” he said.