Weakening regulation after Brexit could lead to financial stability risks, the Bank of England’s deputy governor Sir Jon Cunliffe has warned.
The Bank’s financial stability boss said the UK could be at risk if regulation was cut or if its financial services sector remained in the same structure as the EU but without a say over future changes.
However, Cunliffe suggested future regulation could become less complex and rigid after the UK leaves the EU.
It comes after City watchdog chief Andrew Bailey said the UK could benefit from a “lower burden” regulatory regime after Brexit.
The Financial Conduct Authority (FCA) chief executive said the UK could return to a more flexible, principles and outcomes-based system than that of the EU.
But Bailey said he was sceptical about calls for a light-touch regime, aimed at boosting the UK’s competitiveness on the world stage.
Speaking at a CFO conference today, Cunliffe said a situation in which the UK, home to the largest and most complex financial centre in the world, had no say on regulation was “very uncomfortable.”
He added: “By the same token, pressure to weaken regulation post Brexit would create financial stability risks.
“The Financial Policy Committee (FPC) has made clear that given the size and complexity of its financial sector, post Brexit the UK will need a level of resilience at least as great as that currently planned, which itself exceeds that required by international baseline standards.”
But the deputy governor for financial stability said there was scope to address the rigidity of regulation, which is primarily set at the EU level.
He said: “At some point post Brexit, we will, I think, need to address this rigidity and hard wiring of detail to ensure we have a coherent, effective and flexible regulatory system with appropriate accountability.”