Carney backs custom City deal with EU
Bank Governor says a bespoke financial services agreement would benefit Europe as well as Britain
MARK CARNEY has rejected suggestions from the EU’S top Brexit negotiator that a special trade deal to include financial services is impossible, as Britain ramps up its efforts to safeguard the City’s future.
The Bank of England’s Governor told MPS that a bespoke trade deal between the UK and EU could cover financial services, directly contradicting comments made by the EU’S chief Brexit negotiator Michel Barnier.
“I don’t accept the argument that just because it has not been done in the past, it can’t be done in the future, we’d just walk away from progress if that was the approach we took to issues,” he told MPS on the Commons Treasury select committee yesterday.
“The UK financial system, like it or not, is effectively the banker for Europe in the most complicated bits of finance – there are substantial economies of scale and scope that benefit both sides.”
Britain is fighting to protect London’s status as a global financial hub, with Mr Carney’s comments coming as the Bank revealed it was prepared to treat European banks based in the UK as branches rather than force them to become separately capitalised, and therefore more expensive, subsidiaries.
The pre-emptive move, which Chancellor Philip Hammond hailed as an example that the “Government stands ready to do what is necessary to protect” international banks, was seen as an attempt to win goodwill from the EU and get Uk-based banks better access to European customers.
The Bank cautioned that its proposals were based on “a high degree of supervisory co-operation between the UK and the EU”, adding that it expects close co-operation with home supervisors in instances where banks have UK assets of more than £15bn.
City of London policy chairman Catherine Mcguinness called the proposals a “welcome bit of news to end the year for the City”, with EU banks playing a significant part in Britain’s success in the industry.
Earlier yesterday Christine Lagarde, the head of the IMF, said that it was imperative that the UK secure a good deal for the City in order to minimise the economic impact of Brexit.
Failure to ensure continued uninhibited trade with the EU for financial services and other sectors, such as the automotive industry, “would have significant impact on productivity growth”, the IMF said.
“The sooner there is a clear position as to what the outcome [of EU negotiations] will be, the better,” Ms Lagarde said. “A negotiation that drags on and on with massive uncertainty continuing is simply going to delay the plans, the strategies, the investment decisionmaking process of the whole corporate sector.”
Ms Lagarde indicated she expects the EU’S negotiators to do more to reach a deal, as well as the UK’S team in Brussels.