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BoE's Carney says UK-EU trade links could be global template
[LONDON] Britain's future trading relations in financial services with the European Union could be a template for a global regulatory system, Bank of England Governor Mark Carney said on Tuesday.
Banks in Britain are readying plans to potentially shift some operations to continental Europe as hopes fade for unfettered access to the single market after the UK leaves the bloc.
Some policymakers say the EU's system of "equivalence" could provide a gateway for UK-based banks into the bloc. This refers to the EU allowing firms from outside the EU to trade in the bloc if they comply with similar rules.
Mr Carney said he expects the EU to give "serious consideration" to equivalence with Britain given that the country will already be compliant with European rules.
Mr Carney, who also chairs the Financial Stability Board, a G20 task force that coordinates regulation among the world's leading economies, said equivalence was being looked at at the global level as well.
"That is the way forward for the global financial system," Mr Carney told a committee in the House of Lords, the upper house of Britain's parliament.
The EU could withdraw equivalence at short notice unless there were protections, and an independent dispute resolution mechanism would also be needed to make equivalence work, Mr Carney said.
Furthermore, Britain must be able to go beyond rules applied in other countries at times given the size of its financial sector.
"We wouldn't want to have our hands tied to import ad infinitum rules that are made elsewhere," he said.
Some EU financial centres are hoping to lure clearing in euro-denominated derivatives contracts from a post-Brexit London, an activity it currently dominates and which is seen as a core element of its position as a global financial centre.
"Yes, there will be some business that migrates," Mr Carney said.
But it was debatable whether all derivatives activity would follow shifts in clearing, and there was no need for clearing to take place in the jurisdiction of an asset's currency, Mr Carney said.
He declined to criticise what some lawmakers on the committee called exaggerated comments from British Bankers'Association CEO Anthony Browne, who said last week that banks will start leaving Britain within weeks because of Brexit.
"Some institutions would be in a position to adjust some activity over the course of the next year, if they saw fit," Mr Carney said.