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Woods also repeated his warning of the strain being put on the Bank’s ability to police the financial sector as a result of the changes firms needed to make.
In an annual speech to an audience of financiers at London’s Mansion House, Woods said City firms would become more complicated as a result of the restructuring they would need to undertake. [...]
A “transition or implementation period” was the most important requirement, Woods said, as he warned that the further away an agreement is from Christmas, the less effective it would be in helping to reassure City firms about the changes they need to cope with Brexit.
While the government has acknowledged the need for a transition period, Woods added “the EU’s position on transition is not yet clear – despite some obvious risks to EU financial stability in its absence”.
“If we get to Christmas and the negotiations have not reached any agreement on this topic, diminishing marginal returns will kick in. Firms would start discounting the likelihood of a transition in the central case of their planning.” [...]
Woods said the first phase of contingency plans on jobs would be “relatively modest”, with most of the initial work on setting up new operations in the EU and receiving regulatory approval.
“Contingency planning is a sliding scale of increased commitment, investment and momentum through time. It much more prudent and prosaic than hovering over the relocate button or rushing to the exit door,” he said.
He said that retail banks based in the European Economic Area countries – EU member states, Iceland, Liechtenstein and Norway – which currently operate in the UK would need to set up subsidiaries, which are more stringently regulated than branches.
He also set out proposals that would toughen up the way UK firms with subsidiaries overseas manage their operations. [...]