The Bank of England deputy governor Andrew Bailey has said its first priority in the event of a Brexit vote is to keep financial markets stable and manage the impact on the British economy.
Speaking at a Treasury committee hearing on the economiccosts and benefits of the UK’s EU membership, Bailey said: “The first set of issues that I think would arise would be contingency planning around financial markets and broader macroeconomic fallout from the decision.”
Questions over the consequences of a vote to leave the EU turned to the example of Norway, which is outside the bloc but a member of the single market. Bailey said a Norwegian-style outcome would mean copying EU law “but we wouldn’t really be involved in the process of creating it”. The other possibility, he said, would be at the other end of the spectrum, with a “more freestanding” UK that has bilateral arrangements with the EU.
Pressed by the committee chair, Andrew Tyrie, on whether the Bank is looking at the contingency planning of major financial institutions such as HSBC and Barclays, Bailey said there had been signs of investment activity around the strength of the pound. “Since Christmas, there have been quite marked changes in the pricing of sterling options,” he said. “We obviously then go back to institutions and question what their exposure to this is.”
But this is one of several factors the Bank is monitoring, Bailey said, arguing that “oil prices and emerging markets are in some ways much bigger issues”.
Bailey said proposals backed by David Cameron to make it harder for eurozone countries to impose rules on Britain’s financial sector needed fleshing out. The offer safeguards to limit the ability of eurozone members to impose regulation on the City of London, the EU’s biggest banking centre, as part of reforms designed to dissuade Britons from voting to leave the bloc.
“These are the right words. Let’s now flesh them out,” Bailey said, referring to proposals which will be discussed at a summit of EU leaders in two weeks’ time. “The devil is in the detail. We have a vision as to how it could work. It does not mean it’s as cemented in as it should be.”
In theory, the new framework would make it easier to change poorly thought-out rules such as the solvency II regulations for insurers, Bailey said.
Britain’s referendum on staying in the EU is expected to take place in June.
This article was written by Julia Kollewe, for theguardian.com on Wednesday 3rd February 2016 19.00 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010