Amid dire predictions of how a no-deal Brexit could damage the British economy,, the head of the UK’s Financial Conduct Authority (FCA) has said the impact of such a scenario has become “less severe” because of the regulator’s preparations.
“We continue to prepare for a full range of possible outcomes and scenarios, which is what we must do as a public body,” said Bailey in a speech at Bloomberg’s London office. “There is no reason to believe that Brexit should restrict access to financial markets. The UK’s financial markets are – as the IMF has described them – a global public good, and we want to keep it that way.”
The UK government was recently forced by Parliament to release a document known as “Operation Yellowhammer,” which outlines the worst-case scenarios regarding the impact of a no-deal Brexit. The document raised public concern because it warned that riots, food price spikes, and reduced medical suppliers were possible.
Bailey said the FCA’s preparation work has required close involvement with its counterparts in other countries, particularly in the European Union. He said the FCA continues to be an active member of the European Securities and Markets Authority (ESMA), and still works closely with regulatory authorities in the EU27.
“Wherever we end up, our markets will remain closely linked and we will continue to co-operate closely with our EU counterparts after exit in order to meet our objectives,” he said. “We intend to preserve open markets and not limit access.”
Bailey said that as a result of the progress made in its preparations, the Bank of England has judged that its assessment of the impact of a no-deal scenario has become less severe than it was a year ago.
“This reflects progress across much of the economy,” said Bailey. “Consistent with that conclusion, there is no doubt that financial sector preparations have advanced over the course of this year.”
He added that UK firms have stepped up their preparations, and that UK authorities have made “good progress.”
Bailey said the FCA has concluded new cooperation agreements with the EU markets, and insurance and banking authorities, which will take effect in a no-deal scenario. He said the agreements provide a framework for sharing confidential information, allow UK or EU based firms to delegate or outsource certain activities to firms based in the other jurisdiction, and support future market access and equivalence decisions. He added that the FCA has agreed to changes to 43 non-EU
memorandums of understanding that it needs to amend, though he expects to have all signed by Oct. 31.
In March, the FCA released tips for how companies can prepare for a range of scenarios for when the UK leaves the EU.
“The worst case is what we must prepare for,” said Bailey. “It is what could happen, a scenario not a forecast but real nonetheless.”