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City watchdog chief urges EU authorities to back transition deal

By Kalyeena Makortoff, Press Association Chief City Correspondent

The head of the City watchdog has urged EU authorities to back the Brexit transition deal, saying unilateral concessions by the UK are not enough to safeguard against financial risks.

Financial Conduct Authority chief executive Andrew Bailey said that without a fully secured transition period – which is not yet legally binding – the risks could impact both Britain and the bloc.

“For the moment we cannot assume that such arrangements will be in place and so the UK authorities have also set out plans for unilateral action in the UK to minimise cliff-edge risks, providing continuity for firms doing business in the UK and confidence for their customers,” he said in a speech prepared for the City Week conference at Guildhall in London.

Last month the Bank of England confirmed that lenders and clearing houses will be able to continue using existing passport rights to operate in the UK throughout the transition period until the end of 2020.

Mr Bailey – who said authorities have an “obligation” to preserve financial stability – hit out at EU counterparts for failing to do the same.

“While it is necessary to have unilateral actions in place for the UK, this is nonetheless a distinctly second-best solution to the UK and EU authorities working together to deal with the risks.

“Let’s get on with it, please,” he said.

“Financial stability is far too important to engage in a stand-off.”

A 21-month transition deal was agreed at an EU summit in March, meant to give firms more time to meet new rules under Brexit and prepare their contingency planning.

While it is not final, the Bank of England has said firms should have confidence in a “back-stop” provided under the UK Government’s plans to legislate, if necessary, to create temporary permission regimes to allow relevant firms to continue their activities in the UK for a limited period after withdrawal.

The European Central Bank has signalled that it has no plans to make similar concessions, with its official guidance noting there is “still political uncertainty over whether there will be a transition period”.

A Brexit transition period has yet to be finalised (PA)

“I do recognise that the overall transition or implementation package is viewed as indivisible and that there remain issues to be agreed on it which are outside the area of financial services,” Mr Bailey said.

“But that does not stop authorities both here and in the EU working together to mitigate the cliff-edge risks, even if we do not yet have a final agreement on what these arrangements will be.”

The FCA has earmarked £30 million to deal with the Brexit impact

Its action plan includes providing “technical assistance” to the UK Government in EU talks and other free trade negotiations, working with regulated firms to understand their future plans and the impact that would have on markets and consumers, and assessing the effect of the transition agreement.

The watchdog has said it will also ensure an “appropriate transition” to a new supervisory model for European Economic Area firms.