Andrew Bailey has spoken on how free trade, freedom of location and open markets in financial services can continue after Brexit . His key point was that firms should be able to take their own decisions on where they locate provided there are appropriate regulatory measures in place to protect the public interest. And these measures should be in place, not only as between the UK and the rest of Europe but, increasingly, globally. His view is that regulatory co-operation and alignment has progressed to such an extent that open markets would not damage it, and that Brexit should not be conflated with whether or not to have open global financial markets and trade in financial services. He said losing open markets is not a necessary response to Brexit.
He discussed how regulation should work best – where it is rooted in strong principles (but they must be the right principles), against a framework of rules, and focussed on outcomes.
He talked about the current successes of equivalence as a basis for market access – using the EU/US co-operation on clearing, and the forthcoming MiFID 2 framework for third-country investment firms as examples. He said the UK should be treated the same way as other non-EU members – there should, for example, be no separate arrangements for overseeing outsourced services, because there is already a framework in place that works.
He highlighted 4 elements for strong coordination between jurisdictions – comparability of rules (but not exact mirroring), supervisory coordination, exchange of information and a mechanism to deal with differences. He also stressed the importance of transitional arrangements to allow for a smooth path on Brexit – with the transitional period being as long as it needs to be to allow firms to not fear falling off a cliff edge, or having to make decisions before the reality of the deal is known.