EU holding UK to higher standards on equivalence, says BoE’s Andrew Bailey

The EU is holding the UK to higher standards than other third countries before granting financial services equivalence, according to head of the Bank of England (BoE) Andrew Bailey, who wants Europe to accept global standards when making its decision. Equivalence is a big deal because it would mean financial firms in the UK, including insurers, could continue serving clients in the EU, and vice versa. In a Mansion House speech this week, Mr Bailey said it would be “reasonable” to base equivalence on adherence to global rules. “Less than this was enough when Canada, the US, Australia, Hong Kong and Brazil were all deemed equivalent,” he said in a combative statement. But Mr Bailey went on to say now is not the time to have a “regional argument” between Europe and the UK. He also suggested global, rather than regional, standards will create more open financial markets for all. The EU said it needs to understand how the UK will amend or change rules in the future before granting equivalence for financial firms, including insurers. But Mr Bailey said this is a standard that the EU holds “no other country to”. He suggested that the EU would not agree to such rules itself. “This is unrealistic, dangerous and inconsistent with practice… The EU is almost constantly revising, or contemplating revising, its own rules – and that’s a good thing. So, I dismiss this argument,” the BoE head said. He added that financial services rules in any jurisdiction must have the flexibility to change in the future to maintain stability and respond to events. Mr Bailey said the UK cannot be expected to become a financial services rule-taker from the EU. “It is not acceptable when UK rules govern a system ten times the size of the UK GDP and is not the test up to now to assess equivalence,” he argued. Mr Bailey said the UK would only change rules if they are not working. Any changes would be consistent with global standards, he added. The BoE head said there are three areas where the UK is considering new rules now it is out of the EU. These include a more simplified Basel framework for small domestic banks and a proposal to maintain Basel standards to exclude software assets from bank capital, which goes against the EU’s decision to count software assets as capital from the end of this year. The UK will also review Solvency II, where some rules for life insurance have not worked as well as hoped, Mr Bailey said. “None of this means that the UK should or will create a low-regulation, high-risk, anything-goes financial centre and system. We have an overwhelming body of evidence that such an approach is not in our own interests, let alone anyone else’s,” he continued. The Bank of England’s executive director Anna Sweeney said this week that the UK has “no appetite” to tear up Solvency II or greatly reduce its capital requirements in its review of the regulation. Mr Bailey went on to say that the UK’s financial services future outside the EU should be more outward and globally focused in order to remain a global financial centre. “Open financial markets are in the interests of all – home and abroad – and something we should always strive for,” he said. Mr Bailey added that common global regulatory standards and the UK’s presence on key international bodies, such as the Financial Stability Board and the International Association of Insurance Supervisors, would be key to its position in global financial markets. “It requires us to give up some control over our standards and rules, because the alternative of a narrow domestic control is illusory – it would jeopardise achieving the very things we want: safe open markets and, likewise, open economies,” he said. “We do not participate in these global institutions with the intention to water them down, misguidedly because we think this would preserve some notion of our competitiveness as a nation. The UK could not be a global financial centre for long if we did,” he added.

EU holding UK to higher standards on equivalence, says BoE’s Andrew Bailey

Want to read this article?

Read Next

Insurtech partners with USAID on climate adaptation programme

ICEYE in data collaboration with Juniper Re on flood and wildfire

Senior appointments in Lockton’s crisis management team

European rates up overall but financial and cyber lines falling: Marsh

European Parliament approves regulation to tackle forced labour

Insurtech partners with USAID on climate adaptation programme

ICEYE in data collaboration with Juniper Re on flood and wildfire

Senior appointments in Lockton’s crisis management team

European rates up overall but financial and cyber lines falling: Marsh

European Parliament approves regulation to tackle forced labour

Want to read this article?

Read Next

Insurtech partners with USAID on climate adaptation programme

ICEYE in data collaboration with Juniper Re on flood and wildfire

Senior appointments in Lockton’s crisis management team

European rates up overall but financial and cyber lines falling: Marsh

European Parliament approves regulation to tackle forced labour

Related Articles