Декабря 14, 2017


Regulator sets out Brexit risks

10 Августа 2017, 01:38 | Kenneth Drake

Bank of England fears flood of EU firms could swamp its staff

Sam Woods

Sam Woods, chief executive of the PRA, disclosed the figures in reply to a 24 July letter from Nicky Morgan MP, new chairman of the Treasury select committee, asking for an update on his progress in monitoring banks' Brexit preparations.

According to Woods, this would make such firms more complex and hard to supervise because of strong UK-EU interconnections.

Woods also said the PRA faces a "material risk" to its mandate to supervise banks, and that Brexit places "an extra burden" on the regulator's resources.

In a final point, Woods told Morgan the authorisation and ongoing supervision of a significant number of additional firms was likely to overburden the PRA's resources.

Woods added that risks to financial stability will deepen due to Brexit, as he gave his backing to securing a transitional exit deal.

The BoE's Woods said that re-structuring by financial firms to mitigate risks to their business will in general increase complexity, while dislocation and fragmentation of markets could bump up costs and cut activity.

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Woods added: "This could require banks to be able to withstand, and continue lending in, an environment of higher loan impairments, increased risk of default and lower asset prices and collateral values". And financial centres across the European Union - including Frankfurt, Paris, Dublin, and Luxembourg - are battling to attract financial services work moving out of London as a result of Brexit as a result of expected legal changes that will make operating in the European Union out of London tricky. For instance, RBS is preparing to expand in Amsterdam; Barclays and Bank of America are moving staff to Dublin; while Morgan Stanley has picked Frankfurt.

The BoE will need to ensure that supervising firms with links between the European Union and a Britain outside the bloc, is still doable, he added.

The Bank may end up regulating more firms if there is no deal on passporting, the system through which some insurance companies and banks based in the EU, Iceland, Liechtenstein and Norway are able to operate in the United Kingdom without Bank of England authorisation.

He also warned that the regulator could suffer a significant "material extra burden" by having to regulate more firms when Brexit is undertaken and noted that this and several other concerns posed "a material risk to our objectives, and this work is therefore a top priority".

The PRA is funded by the firms it regulates and has asked for £5.4m more to meet its annual requirement, which stands at £267m for the current financial year.

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