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Brexit talks: Mark Carney says financial regulation at 'fork in the road' | Brexit talks: Mark Carney says financial regulation at 'fork in the road' |
(35 minutes later) | |
Bank of England governor Mark Carney has warned the global financial system is at a "fork in the road" going into the Brexit talks. | Bank of England governor Mark Carney has warned the global financial system is at a "fork in the road" going into the Brexit talks. |
In a major speech on the impact of Brexit on the City of London, Mr Carney said the negotiations would influence how banks are regulated. | In a major speech on the impact of Brexit on the City of London, Mr Carney said the negotiations would influence how banks are regulated. |
The UK and European Union were "ideally positioned" to strike a trade deal on financial regulation, he said. | |
But he warned against a "bonfire of regulation" if a deal was not reached. | |
Prime Minister Theresa May triggered Article 50 last week, starting the formal talks on the UK's withdrawal from the EU. | Prime Minister Theresa May triggered Article 50 last week, starting the formal talks on the UK's withdrawal from the EU. |
The Bank has written to the heads of banks and other financial services firms to ensure they have contingency plans dealing with different outcomes from Brexit. | The Bank has written to the heads of banks and other financial services firms to ensure they have contingency plans dealing with different outcomes from Brexit. |
'Low road' | 'Low road' |
"The outcome of the Brexit negotiations could prove highly influential in determining which path the global financial system takes," Mr Carney said in a speech at Thomson Reuters in Canary Wharf. | "The outcome of the Brexit negotiations could prove highly influential in determining which path the global financial system takes," Mr Carney said in a speech at Thomson Reuters in Canary Wharf. |
He warned against countries taking the "low road" where they turned inwards, cut back on regulations and did not work with other regulators. | |
This would lead to fewer jobs, lower growth and higher domestic risks, he said. | This would lead to fewer jobs, lower growth and higher domestic risks, he said. |
Major US and European banks are based in London, offering their services throughout the EU under a process known as "passporting". | Major US and European banks are based in London, offering their services throughout the EU under a process known as "passporting". |
'Contingency plans' | |
Mr Carney underlined the importance of the City of London to the EU, saying it was "Europe's investment banker" and a "global public good". | Mr Carney underlined the importance of the City of London to the EU, saying it was "Europe's investment banker" and a "global public good". |
He said the two sides were "ideally positioned" to strike a deal on UK-based banks offering services into the EU and vice versa. | |
"We start from a position where the high road is both readily attainable and highly desirable for all involved. | |
"The UK and the rest of the EU have exactly the same rules governing our systems," Mr Carney said. | |
But he also recognised that an agreement on financial services was "one sliver - albeit an important sliver" of the Brexit negotiations. | |
"Given our responsibilities to promote financial stability, the Bank - like its counterparts on the continent - must plan, purely as a precaution, for all eventualities," he says. | "Given our responsibilities to promote financial stability, the Bank - like its counterparts on the continent - must plan, purely as a precaution, for all eventualities," he says. |
As a result, it has sent letters to UK firms who offer services in the EU to ensure they have "contingency plans for the full range of possible scenarios". | |
The vast majority of firms in the City have already put in place such back-up plans, he added. | |
Goldman Sachs, HSBC and UBS are among the banks that have said they will move some jobs to other European cities as a result of Brexit. |