Britain’s financial watchdog called on Monday for immediate coordination with European Union counterparts to ensure that Brexit is as smooth and stable as possible for markets.
The Financial Conduct Authority (FCA) has said financial firms should feel comfortable about relying on a EU transition deal agreed last month between Britain and the EU.
This covers the period between Britain’s planned departure from the European bloc next March and the end of 2020, but EU officials say this was a political deal and will not be legally ratified until at least later in the year.
Firms should therefore press ahead with plans in case of a “hard” Brexit next March, such as setting up new EU hubs.
“It’s important that we have regulatory engagement now because we are dealing with practical issues… and they affect both sides,” FCA Chief Executive Andrew Bailey said.
He told a news conference to discuss the watchdog’s latest business plan that he wants coordination to avoid disruption to derivatives and insurance contracts that straddle borders.
Starting coordination now would mean a framework is ready once transition has been legally ratified, Bailey said.
The FCA said it will need to spend about 30 million pounds on dealing with the broad impact of Brexit on the financial services sector and cut back or delay some areas of work.
One new area, however, is a report due from the watchdog in the third quarter on regulating cryptocurrencies.
“Time will tell if the need to manage Brexit will impact the FCA’s ability to effectively regulate conduct and protect customers,” said David Miller, a partner at KPMG.
Bailey said the FCA may even have to revise higher its Brexit costs depending on how negotiations pan out.
“The regulator is illustrating the amount of work still to be done and shows why firms need to keep their foot on the gas of Brexit planning,” Sarah Isted, a regulation partner at PwC said.
Separately, the Bank of England published its new business plan and Deputy Governor Sam Woods said Brexit will present new challenges.
“The foundation of our approach remains the presumption that there will continue to be a high degree of supervisory cooperation between the UK and the EU, and that the openness of our global financial center benefits both sides,” Woods said.
He expects Britain’s financial system to stay “very large” but could become more complex.
The FCA said it has bolstered international operations to help it shape global financial rules better as Brexit ends Britain’s ability to influence EU regulation.
“It would be a huge error… to be isolationist,” said Bailey, who like Britain’s financial sector wants a UK-EU trade in financial services based on mutual recognition or broad acceptance of each other’s rules.
But EU officials have shown no appetite for such a deal that has never been completed on this scale before.