FCA calls on past glory for happy post-Brexit story
In a long speech delivered today (6 July), “Why free trade and open markets in financial services matter”, Andrew Bailey, chief executive of the FCA, discussed Brexit and gave us all a history lesson – minus a multiple choice test and tricky essay task at the end.
Bailey dismissed talk that Brexit “must inevitably lead to restrictions on trade, on the location of activity in financial services and on open markets”; and cited the commitment of G20 leaders, at the Pittsburgh Summit in 2009, to “avoid fragmentation of markets, protectionism and regulatory arbitrage”.
We shall fight them on the speeches
With the kind of fight that many of us wish the England football team would display, Bailey refutes the notion that “the UK is a different case from other non-EU countries because it has large and nearby financial markets, and therefore there needs to be a more restrictive outcome” for the country.
As way of explanation he offers “longer historical context, because it is such a crucial point”.
Bailey says the approach in Britain (the UK went missing here) “shifted decisively” in 1846 with the repeal of the Corn Laws (these imposed restrictions and tariffs on imported grain), which led to the nation being the “strongest advocate and practitioner of unilateral free trade in the late 19th and early 20th century”.
He believes this came to an end after the First World War as “the issue of how to reconcile international forces with domestic public interests came to the forefront”.
This created a “larger role for the state as representing the public interest”, and the FCA is an example of this process at work, representing such interest in financial conduct.
From the First World War onwards, and thanks to institutions of state representing the public interest, “the EU has over time been a strong proponent of free trade”.
Bailey addressed these issues, and channelling some kind of Shakespearian-styled Q&A, says: “Does Brexit have to mean abandoning the benefits of free trade and open markets in financial services? It should not. Does it require membership of the Single Market to get the benefits of free trade with the EU? It should not.”
It went on, but you get the idea.
All this talk led to what the structure of regulatory co-operation will be to preserve open markets and free trade alongside Brexit.
In response, Bailey says it has had to “construct a fresh system with stronger principles”. He cites an example – namely its Senior Managers Regime, as reported in March, which called for individual accountability.
To cut to the chase, he says the FCA has to “provide comfort to our trading partners that we do uphold the rules and standards in force”.
If the FCA can convince the EU that this is happening, then Bailey thinks the UK will be OK in the post-Brexit age.