Mark Carney, governor of the Bank of England (BoE), said the Bank would cope with licence re-applications from the banking sector should a Brexit deal on financial services not be reached.
Speaking to the House of Commons’ Economic Affairs Committee, Carney said that since Prudential Regulation Authority had been brought under the BoE in 2013, it had been authorising an average of 13 firms a year.
Because of Brexit, the BoE now expected around 150 applications from EEA banks and insurers, plus another 30 to 40 entities that currently relied on the EU’s passporting regime.
“We have the presumption that ultimately we will come to some arrangement with the European authorities that provides a level of supervisory co-operation and information sharing, [allowing] those entities who currently operate through branches here to continue to do so,” Carney said. “That would be in the best interest of how that systems operates and those institutions particularly.”
However, should the UK and EU not come to such an arrangement, Carney said it would fall to the BoE to judge which entities need converting from branches to subsidiaries, and all firms would have to go an assessment process regardless.
In that case, Carney was confident the BoE could handle the workload: “We think we do have the capacity. We have 52 people now working full time, so we have significantly ramped that up, and then we have the full time equivalent of another 30 people, so we have 80, whereas we would have had 25-30 previously.
“The first best situation is that those firms that are ready to seek authorisation – and a number of them have been getting themselves ready – will come in [already], and we’ll be able to space this up.
“Obviously we would benefit from a transition period, but we have the resources, and we have the prospect of a temporary permission regime, which would give us some flexibility.
“In the very unlikely event the transition period isn’t finalised, then we would have to accelerate with the firms’ [applications].”
In December, the BoE opened a consultation on future arrangements for supervising European financial services firms, after reports had emerged that it planned to unilaterally grant them access to the UK market post-Brexit. The consultation closes on February 27.