BoE’s Bailey sees deadlock with EU on City of London access

Bank of England Governor Andrew Bailey said on Tuesday he saw no sign that the European Union was prepared to reopen its doors to British financial services exports following the United Kingdom’s departure from the bloc’s single market.

More than six months since Brexit largely severed the City of London’s access to the EU, Brussels has stalled on deciding whether UK financial rules are ‘equivalent’ to regulation in the bloc, a key condition for granting market access.

The EU has said it is concerned Britain will water down financial services rules in future, and will only resume its equivalence assessments once its member states formally back a new regulatory cooperation framework with Britain.

“On equivalence, I think it’s fair to say that nothing really has moved forwards,” Bailey said at a news conference.

His comments echo those from finance minister Rishi Sunak who said this month that equivalence “has not happened” and it was time to focus on improving the London’s global competitiveness.

The International Monetary Fund is currently reviewing British financial regulation and Bailey said its findings would be the best independent guide to whether British rules fell short of global best practice.

Britain has criticised the EU for demands that it says amount in practice to line-by-line alignment of rules, which Brussels has denied.

“We are committed to outcomes-based equivalence. Those are the arrangements that we have with many countries. But both sides need to want that,” said BoE Deputy Governor Jon Cunliffe, a former British ambassador to the EU.

Britain has currently granted equivalence to the EU in several financial activities, but the bloc has not reciprocated.

Earlier on Tuesday Bailey said he had no intention of loosening financial rules as Britain sought to attract foreign business after Brexit.

“The UK’s reputation for strong standards, independent regulation and financial stability has been and will remain a crucial component of its attractiveness to internationally active financial institutions,” Bailey wrote in a letter to Sunak.

Bailey has previously criticised EU rules as ill-suited to a financial centre like London and too lax in some areas, for example allowing banks to count the value of in-house software as an asset that could be drawn upon during a financial crisis.

However, Sunak wants to relax other rules in areas such as the requirements for listing a company on a stock exchange.