London
07 April 2017
Reporter: Mark Dugdale
Carney: Brexit challenges responsible financial globalisation
How the Brexit negotiations conclude will be a litmus test for responsible financial globalisation, Bank of England head Mark Carney has said.

Carney’s speech on financial services, delivered at Thomson Reuters in London’s Canary Wharf on 7 April, comes a week after the UK triggered Article 50 and commenced the two-year period for negotiating its exit from the EU.

“The UK and the rest of the EU have exactly the same rules governing our systems,” Carney (pictured) said. “And we have the most highly developed frameworks for intensive supervisory cooperation. Capital flows seamlessly across our borders. The current EU legal regime allows firms to passport throughout the union, supervised by the home supervisor.”

As it stands, the EU and the UK are “ideally positioned to create an effective system of deference to each other’s comparable regulatory outcomes, supported by commitments to common minimum standards and open supervisory cooperation”.

Such an outcome would be “entirely consistent” with the UK government’s aim of a “new, comprehensive, bold and ambitious: free trade relationship with the EU that “embraces goods, services and network industries”.

But financial services are only part of a much broader negotiation, Carney conceded, so contingencies need to be put in place in case the status quo changes.

He said: “How the Brexit negotiations conclude will be a litmus test for responsible financial globalisation.”

“Whatever is agreed [during Brexit negotiations], there are risks to financial stability both in the transition to the new relationship and in the new steady state. These risks include disruption of services, a further weakening of investment banking profitability and the potential for greater complexity in firms’ legal structures.”

“Increased complexity would place greater demands on firms’ risk management and on supervisory oversight, and pose challenges for effective resolution. We expect firms to plan accordingly.”

Financial services have proven to be an early point of contention between the UK and the 27 other EU member states, with a German politician recently reviving the prospect of legislating to require euro currency clearing to be carried out in the eurozone.

The prospect won’t fill the City of London with joy, as the loss of its ability to clear euro-denominated transactions would put hundreds of thousands of jobs at risk, according to a recent report from EY.

More news
The latest news from Asset Servicing Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
Custody not a commodity
28 June 2017 | Warsaw | Reporter: Stephanie Palmer
Viewing custody and clearing as a commoditised industry could be putting pressure on pricing and threatening the industry, according to speakers at The Network Forum
BNY Mellon and Australian financial service provider One Investment Group are joining forces to offer global custody services to Australian fund managers, trustees and responsible entities
70 percent say cyber crime will lead to financial crisis
28 June 2017 | Warsaw | Reporter: Stephanie Palmer
The next financial crisis is ‘highly likely’ to be caused by cyber crime, and the only way to manage this is for the industry to come together, according to a panel session at The Network Forum in Warsaw
J.P. Morgan recruits new head of global custody
28 June 2017 | London | Reporter: Mark Dugdale
Hughes has joined the bank from Deutsche Bank, where he was head of strategic execution for global securities services
R3 completes prototype for ECP issuance
27 June 2017 | London | Reporter: Stephanie Palmer
R3 and four of its member banks have collaborated to build a solution for issuing Euro Commercial Paper on a distributed ledger technology platform
€50 billion mandate win for Caceis
27 June 2017 | Rome | Reporter: Stephanie Palmer
Caceis has been selected to provide custody, depository, fund administration and transfer agency services for Amundi SGR, the Italian subsidiary of the Amundi Group
EFAMA elects Nott as new president
26 June 2017 | London | Reporter: Stephanie Palmer
The European Fund and Asset Management Association has elected William Nott of M&G Securities to serve a two-year terms as president
More news