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City showdown

Bank governor attacks ‘unreasonable’ EU

Cheesegrater London

The City has seen some business and jobs move to European hubs (pic: Terry Murden)

Bank of England governor Andrew Bailey has challenged the EU’s insistence that the City complies with Brussels regulations.

Mr Bailey said the City would not allow itself to be “dictated” to by Brussels and would look instead to global financial regulators as the main rule makers.

Financial services were left out of the Brexit deal and the two sides are working towards a March deadline to agree an “equivalence” regime under which each would recognise the other’s regulation.

But Mr Bailey said EU demands had so far been unreasonable. He said the EU had granted equivalence status – a mutual recognition of each side’s regulatory standards – to Canada, the US, Australia, Hong Kong and Brazil based on their adherence to international regulations, but was insisting that London also tracks EU rules.

“I’m afraid a world in which the EU dictates and determines which rules and standards we have in the UK isn’t going to work,” the governor said in his annual Mansion House speech to the City, this year held virtually.

Andrew Bailey Boe pic

Andrew Bailey: ‘cutting off the UK would be a mistake’

“Is the EU going to cut the UK off from itself? There are signs of an intention to do so at the moment but I think that would be a mistake,” he added.

“We have to state the argument for global standards and markets and openness and if we all sign up to that then there’s no need to go in that direction.”

His comments came amid growing concern over lost business and jobs in the UK financial services sector to European hubs such as Amsterdam where €9.2bn shares a day were traded in January – a more than fourfold increase, while trading in London fell to €8.6bn.

Brussels wants to see how far UK rules will diverge from its own amid fears the UK will adopt a low-regulation Singapore-style model that would undercut the EU.

Mr Bailey said: “Let me be clear, none of this means that the UK should or will create a low-regulation, high-risk, anything-goes financial centre and system.

“We have an overwhelming body of evidence that such an approach is not in our own interests, let alone anyone else’s.”

Despite the current showdown, Mr Bailey insisted that London would “undoubtedly continue as one of the world’s leading if not the leading financial centre”.

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Last month Mr Bailey said up to 7,000 finance jobs had so far been relocated from London to rival centres in the EU – well down on predictions of as many as 50,000 losses.

“The EU has argued it must better understand how the UK intends to amend or alter the rules going forwards,” he said.

“This is a standard that the EU holds no other country to and would, I suspect, not agree to be held to itself. It is hard to see beyond one of two ways of interpreting this statement, neither of which stands up to much scrutiny.”

Mr Bailey’s comments are expected to bolster Prime Minister Boris Johnson’s position in talks to seal a longer-term agreement.

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