Bank of England governor Mark Carney has warned of a “fork in the road” for the global financial system, and outlined measures to protect the UK economy against the impact of Brexit.
In a speech given at Thomson Reuters in London this morning, the governor of the Bank of England said that all banks with cross-border activities between the UK and the rest of the EU have been asked to provide Threadneedle Street with written confirmation of “contingency plans” for Brexit by 14 July 2017.
Sam Woods, deputy governor of the Bank of England’s Prudential Regulation Authority, sent a letter to all relevant firms this morning, asking them to prepare for “a full range of possible scenarios” and described an “uneven” level of planning across firms.
The letter warned that firms who risk losing passporting rights must prepare for possible structural change including setting up a subsidiary.
Describing Brexit negotiations as a “litmus test” for responsible financial globalisation, Mark outlined the risks currently faced by the UK economy, including “disruption of services, a further weakening of investment banking profitability and the potential for greater complexity in firms’ legal structures.”
On a global scale he outlined the wider risk of countries’ financial systems turning inwards and reducing reliance on each-other’s financial systems, warning against “protectionism” and looking instead for “mutual recognition and cooperation both with Europe and across the G20.”
Carney called for “dynamism” and a “new, independent dispute resolution mechanism” to mediate between the EU and the UK’s regulatory systems. A large number of UK firms could be regulated by the Prudential Regulation Authority, he suggested.
He emphasised that there will be “no bonfire of financial regulation”, and that banks would be ring-fenced.
Carney, who has recently returned from a trade delegation to India, was optimistic in underlining the Bank of England’s “hard fought financial reform” over the last decade, making the UK’s financial system “a global public good” and “pillar of strength for the international monetary and financial system.”
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He declared “London is Europe’s investment banker,” and pointed out that its “vibrant FinTech centre” employs over 61,000 people.