By Huw Jones
LONDON (Reuters) – Relying on the European Union’s securities rules to allow banks access to the single market after Britain leaves the bloc was not a “sweeping solution”, Bank of England Deputy Governor Sam Woods said on Tuesday.
Banks want to maintain their “passporting” rights to the EU after Brexit so they can continue to offer their services to customers on the continent from London.
Under EU securities rules which come into force in 2018, financial firms from outside the bloc might gain access to the single market if they can show their home rules are “equivalent” in strictness to the bloc’s rules.
Woods cautioned against banks pinning all their hopes on this “MiFID II” law as Britain’s trade talks would be broader.
“It would be hard to be confident that would be a sweeping solution for everything, partly because of the scale of this activity at the moment,” Woods told parliament’s Treasury Select Committee.
“While I think it’s important, it wouldn’t place too much weight personally on the fine specificities of MiFID II or indeed any other one piece of the passporting regime.”
MiFID mainly covered investment firms rather than banks or insurers, Woods said.
Financial lawyers said banks were already taking a realistic view of life outside the EU.
“People are scenario planning for not getting a passport. For business planning you have to assume there is going to be something less than we have currently,” said Etay Katz, a financial lawyer at Allen & Overy.
Separately on Tuesday, Andrew Bailey, the new head of Britain’s Financial Conduct Authority, said the watchdog will continue to apply all EU rules until there is clarity on future relations with the bloc.
“We will continue to implement EU legislation until the future is clear, something that is again a legal requirement,” Bailey told his first annual meeting.
Brexit won’t mean a “bonfire of regulations” and the EU’s cap on banker bonuses might need to stay to satisfy any EU “equivalence” deal, Bailey said
“For the UK to have easy access to the EU, most people believe that we will have to comply with, or have the equivalent of, many of the existing EU financial services rules,” said Nicholas Stretch, a partner with law firm CMS.
Bailey welcomed the government’s statement that Britain, Europe’s biggest financial center, would seek access for financial firms in Britain to the EU’s single market in coming trade negotiations.
He also said he valued being able to recruit staff from across the world. Britain has not guaranteed that EU citizens in Britain can stay after the country leaves the bloc.
“These are unsettling times, and we owe it to people who work so hard to support us to put their minds at rest,” Bailey said.
(Additional reporting by David Milliken and Ana Nicolaci da Costa; editing by Jason Neely/Keith Weir)