UK regulatory authorities have released statements in respect of the result on the European Union referendum and the next steps following the UK’s decision to leave the EU, aiming to reaffirm the public that regulators will do everything to ensure stability and emphasizing that EU rules remain applicable in the UK for the time being.
Mark Carney, the Governor of the Bank of England said in a speech following the vote that inevitably there will be a period of uncertainty and adjustment following this result.
He stressed that there will be no initial change in the way our people can travel, in the way our goods can move or the way our services can be sold. He also underlined that it will take some time for the United Kingdom to establish new relationships with Europe and the rest of the world. As a result, some market and economic volatility can be expected as this process unfolds.
According to him, however, authorities are well prepared for this as the Treasury and the Bank of England have engaged in extensive contingency planning.
He pointed out that the Bank would not hesitate to take additional measures as required as those markets adjust and the UK economy moves forward. He said that UK financial system has been consistently strengthened over the last seven years and that the Bank of England has stress tested them against scenarios more severe than the country currently faces. He also confirmed that as a backstop, and to support the functioning of markets, the Bank of England stands ready to provide more than £250bn of additional funds through its normal facilities as well as substantial liquidity in foreign currency, if required.
Carney concluded that the Bank of England has put in place extensive contingency plans, ensuring that the core of the UK’s financial system is well-capitalised, liquid and strong. The Bank of England will assess economic conditions and will consider any additional policy responses in the coming weeks.
The Financial Conduct Authority (FCA) stated that it was in very close contact with the firms it supervises as well as the Treasury, the Bank of England and other UK authorities, and that the regulator is monitoring developments in the financial markets. The FCA highlighted that much financial regulation currently applicable in the UK derives from EU legislation and that this regulation will remain applicable until any changes are made, which will be a matter for Government and Parliament. The regulator emphasised that firms must continue to abide by their obligations under UK law, including those derived from EU law and continue with implementation plans for legislation that is still to come into effect. Consumers’ rights and protections, including any derived from EU legislation, are unaffected by the result of the referendum and will remain unchanged unless and until the Government changes the applicable legislation.
Since it will take some time to conclude the withdrawal it is not clear whether existing EU regulations or future regulatory initiatives such as MiFID II will remain to apply as this depends on the kind of future relationship between the EU and the UK and the outcome of the negotiations of the new UK government with the European Union.
The text of the speech of the Governor of the Bank of England is available here.
For the full FCA statement, see here.