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Speaking to a House of Lords select committee on Wednesday, Andrew Bailey, the chief executive of the Financial Conduct Authority, warned that the “patchwork” of action across EU member states to mitigate the legal risk posed by vast amounts of uncleared derivatives may not be enough to stem market disruption in the event of a hard Brexit.
Mr Bailey drew the distinction between the UK’s approach to privately traded derivatives contracts — which it views as a financial-stability risk — and the EU’s. The EU has suggested the UK’s warnings are overblown and has left it up to member states and the private sector to find solutions to the issue of contract continuity, with varying results.
"Going back to my point about not being able to give you assurance on market disruption in the event of a no-deal exit, those kind of things are still relevant as it is a patchwork and it is a patchwork of different actions,” Mr Bailey told senior lawmakers.
His comments come as Theresa May, the prime minister, is floating the idea of a “short, limited delay” to Brexit rather than crashing out of the EU with no formal agreement. That came after she conceded that businesses and governments are woefully underprepared for a disorderly departure from the EU.
But Mr Bailey added that he had seen nothing over the past few days that would make the FCA push the pause button on its contingency plans for a cliff-edge Brexit on March 29. Mr Bailey said there would have to be a “very clear parliamentary position” to cause the FCA to halt its planning for the financial sector. [...]
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