Greater risks for the EU than for the UK if no 2019 Brexit transition deal agreed, says Bank of England Governor
The European Union is at greater risk than the UK if the two parties are unable to agree a financial transition phase for the City of London after Brexit in 2019, the Governor of the Bank of England, Mark Carney, has warned.
Giving evidence to the Treasury Select Committee, Mr Carney stressed again that it would be “welcome” and “highly advisable” for UK-based financial firms that do business with Continental Europe to receive transition arrangements so they do not lose access abruptly in two years’ time.
“If there is not such a transition put in place, in our view it will have consequences. We will work to mitigate those consequences as much as possible,” he added.
But he stressed that if this did not happen the greater financial stability risk lay with European states, rather than the UK.
“I’m not saying there are not financial stability risks to the UK – and there are economic risks to the UK – but there are greater financial stability risks on the continent in the short term for the transition than there are for the UK,” he said.
The Governor stressed the reliance of European households, governments, corporations and banks on the City.
“If you rely on a jurisdiction for half of your lending [and] half of your securities transactions you should think very carefully about transition from where you are today to where you will be tomorrow,” he said.
The fear in the City is that the UK will leave the single market, potentially meaning UK-based financial firms will suddenly no longer be able to sell services to Continental customers.
The UK-based derivative clearing operations are also thought likely to be required to move to mainland Europe after Brexit.