Brexit will make markets less efficient but it won’t be disastrous for Britain’s economy, an appointee to the Bank of England’s Financial Policy Committee (FPC) said on Monday.
Britain left the European Union in January, with transition arrangements that afford continued full access to the bloc ending in December.
“It will cause fragmentation, it will cause inefficiency, there will be problems with regulation, but it’s not going to be disastrous… for the economy,” Jonathan Hall, told a confirmation hearing in parliament’s Treasury Select Committee.
Faced with an economy slammed by the COVID-19 crisis, Hall, a former Goldman Sachs banker, is due to start a three-year term on the FPC, a body set up after regulators failed to spot the last financial crisis coming a decade ago.
Britain’s financial sector is “quite different” in size and complexity compared with its European peers, Hall said.
Future direct EU access for financial firms in Britain will hinge on Britain remaining “equivalent” or aligned with rules in Europe, but Hall said Britain can’t be a “rule taker”.
“It’s very important that the UK does remain the regulator for the financial market in the UK,” he said.
Britain’s banks, some of whom needed rescuing by taxpayers in the last crisis, were in good shape when the COVID-19 shock hit markets in March, he said.
It was “so far, so good” and there is no evidence that tougher capital rules brought in after the last crisis were restricting the ability of banks to lend to help businesses recover from the impact of COVID, Hall said.
Britain is looking at ways for insurers, pension funds and others to invest in firms struggling to repay loans taken out during the pandemic.