EU demands on future regulation ‘problematic’ says Bank of England governor

The governor of the Bank of England has said that it is “problematic” that the European Union wants information on what regulations the UK wants to change in the future.

Andrew Bailey was speaking of the demand for so-called “equivalence” which ensures UK and EU rules are in line.

Without it, the EU could block UK based companies from selling services in Europe.

“I’m a strong supporter of open markets. I fail to see why people would want to close themselves off from open markets,” Mr Bailey told MPs on the Treasury Select Committee.

“But the situation we find ourselves in is that the EU wants more information from the UK on what its future intentions are on regulation. I think that’s quite problematic frankly in terms of equivalence.”

The EU has said that it only wants to allow euro-denominated derivatives trading, which includes buying and selling currency and bonds, to take place within the bloc or somewhere else with equivalent rules.

The Government agreed a deal last month which covers trade in the post-Brexit era.

Negotiators are now pushing to sign a memorandum of understanding about financial services, which forms a major part of the UK economy but was not included in last month’s deal, by March.

Mr Bailey said that the Bank would give its full support to the Treasury in negotiating this, but said he had not discussed with the Treasury whether the Bank will be directly involved with the negotiations.

He also supported efforts to ensure the UK does not only change its rules when regulators in Brussels say so.

“I would strongly recommend that we do not become a rule-taker, I think that is a very bad place to end up in. And if the price of that is no equivalence, then I am afraid that will follow,” Mr Bailey said.

“But I think that’s the wrong outcome for both the European Union and the UK, but if that’s where it goes to.”

Markets have been stable in the last week or two, partly because they were “broadly expecting what they got”, he said. The Bank had been more worried about how markets would react.

Around 5,000 to 7,000 jobs have migrated from the UK financial services sector because of Brexit, Mr Bailey said.