The EU’s top financial services boss today contradicted warnings over a potential catastrophe involving trillions of pounds of contracts, as a Bank of England boss suggested that political concerns had affected European regulators’ stance in the latest stage of a row over Brexit preparations.
EU financial services commissioner Valdis Dombrovskis today said that financial contracts are not at risk of becoming void, in spite of repeated warnings from Bank of England governorMark Carney that authorities in the UK and Europe need to act.
"Overall, even after Brexit, the performance of existing obligations can generally continue," Dombrovskis said, according to Reuters.
The argument between regulators flared up after the European Banking Authority (EBA), the EU banks regulator, criticised firms’ preparations for Brexit, saying they were risking financial stability by avoiding costly back-up plans.
However, the Bank of England’s deputy governor, Sam Woods, today agreed that the EBA opinion, which was resisted by the UK, may have been affected by political concerns.
“A reasonable person could infer that there was something of that there in the mix,” he told MPs on the Treasury Select Committee, adding that “our negotiating capital in these fora is very close to zero”.
European authorities see the issue in similar terms to the UK but “don’t go the last yard in saying the authorities ought to do something,” Woods said. They are “very nervous” to be seen to hold an opinion on Brexit negotiations, he added, while the Bank sees the lack of movement as a purely technical issue.
The Bank of England has made it clear it does not believe that firms can mitigate the risk of contracts becoming legally unenforceable, with consequences for financial stability.
Carney last month said that £96 trillion of existing derivatives contracts are at risk, unless authorities on both sides step in.
"It does not appear to be at this juncture an issue of general nature linked to contract continuity," Dombrovskis said.