Bank of England warns Brexit will put strain on regulatory resources
The Bank of England has warned that the task of regulating the City after Brexit will put a strain on its ability to police the financial sector. Deputy governor Sam Woods also said the Bank’s regulatory arm, the Prudential Regulation Authority, faced “a material risk to its objectives” – which include promoting financial stability – as it deals with the UK’s exit from the EU. Woods warned of a “material extra burden” on the PRA if it had to regulate more financial firms as they made plans to cope with Brexit. “It is incumbent on us to manage this burden but we may have to make some difficult prioritisation decisions in order to accommodate it,” said Woods, chief executive of the PRA. In a letter to Nicky Morgan, the Conservative MP and new head of the Treasury select committee, Woods also described handling the fallout from Brexit as a top priority for the PRA. Backing calls from the chancellor, Philip Hammond, for a transitional exit deal, Woods added: “Some form of implementation period is desirable in order to give UK and EU firms more time to make the necessary changes to adjust to the UK’s new relationship with the EU in an orderly way.” He also outlined the risks contained in the Bank’s half-yearly assessment of financial stability, in which it warned that business conducted in the City could fragment across other financial centres, pushing up the costs to the EU and the UK. It also warned of the risk to the UK economy from potential disruption to trade and the need for banks to be braced for higher bad debt charges if loans turned sour owing to Brexit-related economic turbulence.