The benefits of free migration and free trade provided by EU membership has greatly benefitted the UK economy, the Bank of England said today, but the central bank warned it was vital that Britain maintain a degree of independence from Europe over its financial regulation.
In a speech delivered at Oxford University, Bank governor Mark Carney blasted EU rules on capping bonuses, arguing that “restricting the proportion of pay that can be clawed back in the event of excessive risk taking or poor conduct, thereby weakening discipline from remuneration.”
He also said there was a reduced role for national discretion in insurance supervision.
The Bank added in its report on EU membership published today that “participation in the single market means that the majority of the legislation and regulation applying to the financial sector in the UK is determined at an EU level.”
“As home to the world’s leading international financial centre, it is vital that UK authorities are able to apply the highest standards and have the flexibility to take action to address particular stability risks.”
The complaints came after Carney and the Bank heaped praise on the EU’s principles of free trade and free movement of labour.
“The EU has arguably bolstered its [the UK economy’s dynamism] by establishing the world’s largest single market,” Carney said.
He said that greater dynamism meant the economy could grow faster without generating inflationary pressure.
The Bank’s report said: “It is very likely that the openness associated with membership of the world’s largest economic area with free movement of goods, services, capital and labour has led to greater economic dynamism in the UK.”
The bank will be preparing contingency plans but will not reveal them until after the government’s promised referendum.