23 November 2017

Bloomberg: Bank of France warns on need to avoid `cliff-edge' Brexit

Bank of France Governor Francois Villeroy de Galhau warned that the UK and European Union need to move to avoid the consequences of an abrupt separation that would pose risks to both economies.

“All actors should as of now undertake all the necessary preparations to avoid any potential ‘cliff-edge,”’ Villeroy said Thursday at a lunch organized by the French Chamber of Commerce in London. [...]

“The British people chose to leave the EU and, even if we regret it, we respect this democratic decision,” he said. “Now we have to work toward reducing uncertainty and the negative impact it may have for the United Kingdom and, albeit to a lesser extent, for the European Union.”

Villeroy also emphasized that EU authorities have a duty to protect the bloc’s financial system and that will mean inevitably that some financial business will shift from Britain to the remaining 27 members of the bloc. [...]

“There is one principle in particular to which we have to stick in preparing the agreement between the EU and the U.K.: in the single market, you cannot separate access and rules,” he said. “For the financial services industry, this means that you can hardly expect to obtain a European passport if you do not accept the single market’s rules.” [...]

Villeroy predicted the region will move toward some degree of “Europeanization” for wholesale banking, insurers and asset managers. At the same time, the EU should not be lower the bar for financial regulation and should prevent entities from outside the region setting up shell companies to obtain passporting rights to offer services on the continent.

All “super-systemic” operations for clearing of the euro-denominated assets should be moved from London after Brexit to “where the supervision of the Euro-system can be exercised effectively,” he said.

Full article on Bloomberg

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