Bank of England: “Sudden adjustment could disrupt the provision of market liquidity and investment banking services, particularly to the EU real economy”.

The Financial Policy Committee of the Bank of England noted risks that might emerge if obstacles were suddenly created to UK financial services firms offering services in EU economies: “Sudden adjustment could disrupt the provision of market liquidity and investment banking services, particularly to the EU real economy, which could spill back to the UK economy through trade and financial linkages.”

In a similar vein, Dr Mark Carney, Governor of the Bank of England, earlier told the Treasury Select Committee that: “The financial stability risks around that process are greater on the continent than they are in the UK. I am not saying that there are not financial stability risks to the UK, and there are economic risks to the UK. However, there are greater financial stability risks on the continent in the short term for the transition than there are for the UK.”

He went on to argue that: “The high‑level point is that there is tremendous capacity, depth and breadth of financial services resident here in the UK: people, capital, institutions, plumbing, wiring and regulatory constructs. At the point of leaving, depending on the nature of a transition phase, implementation phase, grandfathering phase—whatever you want to call it; these are different words for what I see as the same thing—capacity will be taken out because certain institutions are not authorised, people are not in the right place, capital liquidity is not in the right place. Again, this varies with transition. That is more likely to affect Europe than the UK. It will affect the UK as well, but in my view it is a greater risk for Europe”.

Finally, he noted that: “If you rely on a jurisdiction for three quarters of your hedging activity, more than three quarters of your FX activity, half of your lending and half of your securities transactions, you should think very carefully about the transition from where you are today to where the new equilibrium will be.”