FCA chief: best Brexit solution is still equivalence

Author: Jimmie Franklin | Published: 16 Sep 2019
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In a speech in London this morning, Financial Conduct Authority (FCA) chief executive Andrew Bailey set out the continued aims and ambitions of the regulator as the financial sector grapples with continued Brexit uncertainty.

While he joined his former colleagues at the Bank of England in being positive about the progress that has been made by the financial sector to mitigate circumstances in the event of a no-deal Brexit, he warned: "There remains a risk of adverse outcomes for consumers from disruption in Brexit."

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Bailey continued: "we have made considerable progress, but we do not underestimate the task ahead", adding that the regulator will continue to work with firms to ensure that their contingency plans are in order.

He also insisted that the focus of the FCA is a strong commitment to open financial markets; something which he does not think needs to be compromised by Brexit.

There are however a number of lingering issues that in one form or another require further action, either in the UK or the EU – for instance, the derivatives trading obligation (DTO).

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Again stressing the need for a set of equivalence agreements between the UK and the EU, Bailey warned that unless the UK and the EU find each other’s regulatory regimes equivalent, EU firms will not be able to meet the EU’s DTO by using UK trading venues to trade in-scope derivatives, and vice versa.

This would mean harm to both markets, he added, as EU firms may lose access to UK liquidity pools, resulting in fragmentation.

The FCA is overall positive about the future of UK regulation, and keen to assure markets that there will be no spiral of deregulation once the UK departs.

"Left to our own devices, we will consider doing things differently," he said in a Q&A following his speech, insisting that the UK would not end up being a rule-taker as feared by many in the industry.

Overall, he feels the regulatory direction taken by the UK and the EU will continue to produce the same outcomes – even if they go down different roads to get there.

Read the full speech here.

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