Bank of England in ‘regular discussion’ with Treasury over no-deal Brexit powers
The Bank of England is in regular discussions with the Treasury over “no deal powers” to ensure financial stability if Britain leaves the EU on 29 March.
The bank’s governor Mark Carney told the Treasury Select Committee it needed more regulatory powers by the end of March in order to protect financial firms in the event of a no-deal Brexit.
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His comments came just hours after Theresa May’s heavy defeat over her Brexit deal.
But Carney said market sentiment – a rally in the pound and Gilts – suggested that the defeat made no-deal Brexit less likely.
Sterling has rallied towards $1.29 since the Commons vote last night.
Bank of England policymaker Richard Sharp told MPs that the national credibility may be harmed if the uncertainty lasted much longer.
He said global investors won’t trust the government to “manage financial affairs” and be put off the UK.
The hearing also revealed that the Bank of England and the European Central Bank were in disagreement over parts of the no deal, no transition scenario affecting financial services.
Carney said the outstanding issues over no deal powers included over the counter derivatives and in particular contract continuity.
He said: “This is relevant particularly for firms that are winding up, EU firms that would have continuing operations we can address with the temporary recognition regime.”
When asked if the bank had a date by which it needed the powers, he said: “By 29 March, when I go back to the bank there will be some stern looks at me for saying that.
“But firms that are running off need to know.”
The governor predicted more volatility ahead but said the markets were “waiting” and that movements since the vote didn’t hold much weight.
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The hearing also revealed that the Bank of England and the European Central Bank were in disagreement over parts of the no deal, no transition scenario affecting financial services.
Carney denied a rift but said the difference of opinion was over the risks associated with uncleared derivatives.