Treasury and BoE at loggerheads over post-Brexit rules
The Treasury and the Bank of England are said to be locked in a battle over regulation of the City after Brexit.
Relations between the BoE and the Treasury are “very, very bad”, according to the Financial Times, because the BoE does not want the UK to be a “rule taker” from the EU whereas Chancellor Philip Hammond wants Britain to stay close to EU rules in the hope of securing access for the City to the single market.
The BoE and the Treasury had a fragile truce that has been broken by growing concerns that the EU will not accept a “mutual recognition plan” that would set common objectives but give the BoE the leeway it wants. Michel Barnier, the EU’s chief negotiator, has rejected the idea and said repeatedly Britain will not get special access to the single market.
Jon Cunliffe, the BoE’s deputy governor for financial stability, has fallen out with Hammond, making relations between the institutions the worst in memory. “It is very, very bad,” a BoE told the FT. The bank wants to have as much control as possible and doesn’t want to be a rule taker.”
The BoE is Britain’s prudential financial regulator and wants to set its own rules because of the size of the City, which dwarfs other EU countries’ financial sectors. Governor Mark Carney has said the EU needs to retain access to the City’s financial services industry which is “the investment banker for Europe”.
"Some argue that the EU desperately needs the City of London, and that access to financing for EU27 business would be hampered – and economic growth undermined – without giving UK operators the same market access as today,” Barnier said. “This is not what we hear from market participants, and it is not the analysis that we have made ourselves.”
Instead, Hammond, one of the leading remain supporters in the UK cabinet, is trying to find ways to co-ordinate regulation more fully with Brussels to get a better version of the EU’s equivalence regime, which it offers the US and other countries.
“It’s terrible. Relations between the BoE and the Treasury on this are at new lows,” an official close to Brexit talks told the FT.