Brexit planning stretching financial regulator’s resources – PRA chief

● Some tough decisions needed on priorities, he tells Treasury committee

The Bank of England’s financial regulator has warned it may have to take its eye off other areas as it faces a “material extra burden” from Brexit planning.

Sam Woods, chief executive of the Prudential Regulation Authority (PRA), said while the watchdog was having to make work on Britain’s EU withdrawal its “top priority”, this would significantly strain its resources.

In a response to a letter from the new Treasury Select Committee chair Nicky Morgan, he said the PRA – which monitors the financial strength of individual banks and insurers – would have to make tough decisions.

He said the prospect of authorising and supervising more firms set up as a result of contingency planning was “likely to place a material extra burden on the PRA’S resources.

“It is incumbent on us to manage this burden but we may have to make some difficult prioritisation decisions in order to accommodate it”.

The warning comes after Ms Morgan called on Woods last month to reveal how City firms were preparing for a potential cliff-edge Brexit and whether those plans posed a threat to UK financial stability.

In his reply dated 2 August, Woods said the threat of fallout across the City from the UK’S withdrawal from the EU posed a “material risk to our objectives and this work is therefore a top priority”.

The PRA has collected details from more than 400 banks and financial firms with cross-border activities between the UK and the EU, including subsidiaries of US investment banks based in London, on their preparations for all Brexit scenarios, including a “no deal” outcome to the current negotiations.

Woodssaidtheprawasanalysing the responses individually and collectively to assess any possible risks to the country’s financial stability.

The PRA and Financial Policy Committee, which monitors systemic risk, hope to conclude on this work in the autumn. Morgan said the Treasury select committee would keep a close eye on the PRA’S resources burden from Brexit.

She said: “The UK leaving the European Union is a complex task. The potential extra burden on the PRA’S resources, and the risk that may pose to its objectives, is an issue that I’m sure the committee will want to monitor.”

Woods also used his letter to reiterate the PRA’S call for a transitional arrangement “to give UK and EU firms more time to make the necessary changes to adjust to the UK’S new relationship with the EU”.