Finance

UK will not engage in ‘tit for tat’ with EU over financial services

Britain will not engage in “tit for tat” with the EU by restricting access to the City of London or trying to stop UK-based banking staff relocating to the continent, a senior Bank of England official said on Tuesday.

Sam Woods, chief executive of the BoE’s Prudential Regulation Authority, said the UK was “absolutely not in a tit-for-tat game” on financial services market access and staffing.

He said Britain’s status as an international financial centre meant that it would continue to be open to banks from other countries.

Noting post-Brexit tensions between the EU and the UK, Woods told the Financial Times banking summit: “The EU has a more location-based view of life and they are implementing that vision, and that is leading to some of the tensions. It is a natural consequence of Brexit and we will have to navigate it in a sensible way.”

The EU has said it wants international banks traditionally based in London to have sizeable operations on the continent to run their European businesses after the UK left the bloc’s single market last year.

In recent months, the European Commission has proposed legislation that would make it harder for banks from countries outside the EU, including the UK, to sell services into the bloc.

The European Central Bank, as EU banking supervisor, has also been pushing banks to move more staff from the UK to the EU.

Woods said he was “relatively sanguine” about the scale of banks’ job and asset moves from the UK so far.

However, the BoE was keeping an eye on developments to make sure the ECB did not become so demanding it started hollowing out banks’ operations in London — which “would be unacceptable”.

Woods also said that “spectacular blow-ups” — including the collapse of hedge fund Archegos and the Greensill Capital scandal — had made the PRA more attuned to the risk that poor conduct would emerge as the memory of the financial crisis faded.

“You can look at what is in the public domain, and it is reasonable to question, are people really sufficiently focused on the things that can go wrong, both from a conduct and prudential perspective?” he added.

The PRA and the Financial Conduct Authority introduced new governance and conduct standards — including a regime for holding executives personally accountable for major failures — in the aftermath of the financial crisis. Enforcement cases have been relatively rare.

The most public action taken by the PRA and FCA was in relation to Barclays’ former chief executive Jes Staley, who stepped down last month.

Regulators issued both Staley and Barclays with draft findings of their review into his relationship with the late Jeffrey Epstein, a convicted sex offender. Woods declined to comment on the case.

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