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BREXIT: FCA head asks for EU access for banks that conform to 'global standards'

Access to the EU's financial markets should be based on common recognition of global standards instead of the current "granular, technical and detailed" legislation, the head of the UK's Financial Conduct Authority (FCA) has said.

FCA chief executive Andrew Bailey told the Economic Council Financial Markets Policy conference in Berlin that global standards have informed several regulatory initiatives since the financial crisis of 2008.

"Would it be possible … to base market access on common recognition of higher level global standards which are transparent and subject to regular review? Wouldn’t this be the best thing we could do to support the global economy? You won’t be surprised to know that I think the answers here are ‘yes’," Bailey said.

"The global standards we have today were not put in place to facilitate market access. Therefore they are not currently regarded as providing an alternative either to the financial services passport within the EU single market or to third country access provisions as provided in certain EU directives such as MIFID II," he said.

"But they are designed to ensure the objective of global financial stability is enhanced and they are set up to work across a broad range of legal and regulatory regimes. They are high level in nature, but I see that as an advantage since they should capture the essence of broad equivalence on which market access should depend," Bailey said.

A decision to determine market access using global standards would be "a decisive step in the right direction at a time when the openness of the world economy is more under threat", he said.

Currently passporting arrangements allow firms based in one EU member state to trade anywhere in the bloc without having to seek multiple authorisations. However, the UK is expected to lose its passporting rights when it leaves the EU.

Almost five and a half thousand UK financial firms rely on at least one regulatory 'passport', allowing them to market and sell their products throughout the European Economic Area (EEA), the FCA said last year.

A further 8,000 firms based in the EU or EEA have been granted passports to market and sell their products in the UK according to the FCA figures.

However, ratings agency Moody's said at the time that most UK and EEA firms would find the loss of passporting rights following the UK's formal withdrawal from the EU to be "manageable".

The ratings agency is anticipating at least a short-term impact on firms' profitability if they have to move some of their activities into the EU in order to continue to benefit from passporting, but said it was "unlikely that all permissions granted to financial firms will be lost".

"This is because, even without a formal arrangement, EU law already provides for limited recognition of non-EU regulatory regimes for the purpose of undertaking investment and banking business," said Moody's.

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