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Mansion House speech – by Andrew Bailey, Governor of the Bank of England

Updated: Mar 24, 2021

Given the critical importance of Britain’s financial services sector to the UK economy as a whole, we bring you the full text of Andrew Bailey’s annual Mansion House speech to the City of London last week.

Two over-riding themes emerge: the need for the City to adapt and change as circumstances require, and where change is necessary, to co-operate at an international rather than purely regional level. This in turn will require Britain to be particularly robust in defending its interests when negotiating so-called 'equivalence rules' with the EU. The underlying points he makes are so fundamental, we make no apology for quoting at length from his speech:

“As we look forward – and for so many reasons we must look forward – it is important to focus on the future of financial services, and the important role they play in our economy and internationally. And why open financial markets are important to us all here and abroad.

This means deferring to the rules of others to protect our citizens or firms when they choose to do business there. There is no doubt in my mind that the work done on global standards since the financial crisis has made this process easier to support and safer and improved the level of trust we have in each other.”

By contrast “the post-Brexit equivalence process between the UK and EU has not been straightforward. It is, of course, two distinct processes – one for the UK to recognise the EU as equivalent to the UK, and one for vice versa. The UK has granted equivalence to the EU in some areas, but the EU has not done likewise to the UK.”

In the following paragraphs the Governor goes on to say how important the global Financial Stability Board has become:

"In order to preserve this public good of an open world economy and now also an open financial system, has required a commitment to institution building both internationally and domestically. Bretton Woods created the IMF and World Bank, and slightly less directly the GATT and then WTO. Out of the financial crisis came the importance of the global Financial Stability Board with a mandate to promote international financial stability underpinned by strong regulation, supervisory and other financial sector policies, reinforcing thereby the importance of G20 nations.

The FSB works closely with, and is supported by, the four standard setting bodies of the international financial system – the Basel Committee for banks, IOSCO for markets, the IAIS for insurance, and the CPMI for payment and markets infrastructure. And, just to underline the importance we see in these bodies, it is with pride that I can say that the Bank of England chairs two of the four – Jon Cunliffe for CPMI and Victoria Saporta for IAIS.

In view of the above, it is astonishing that the EU should be considering lowering their standards to a level below those set by the Basel Committee for banks as outlined below: the implications are potentially so far-reaching we have highlighted his words in red:

"The EU changes its rules in December to allow software assets to count as bank capital. The Basel Standards do not include intangible assets in bank capital, which would include software assets in the UK. We have not identified any evidence to support the notion that software assets have value in stress. On that basis, including them in bank capital would give a false picture of a bank’s loss absorbing capacity. We are therefore intending to consult on plans to amend this on-shored EU rule in order to maintain the previous requirements of excluding software assets from bank capital. This is in line with global standards and will enhance the safety and soundness of UK firms."

The Governor concludes, "There is no doubt in my mind that an open world economy supported by an open financial system that respects the public interest objective of financial stability will bring the greatest benefits all round. It needs to be supported by effective institutions and strong international standards. But this must be a global, not a regional, regime to be effective. We have an opportunity to move forward and rebuild our economies, post-Covid, supported by our financial systems. Now is not the time to have a regional argument.”

The full text of the speech can be read here with a link to the original in the link below.

Mansion House speech by Andrew Bailey -T
Download • 126KB

Following his speech, Andrew Bailey vows to fight Brussels power grab over the City

Here is an article dated 24 February 2021 by Tim Wallace, Deputy Economics Editor of the Telegraph:

Andrew Bailey has warned Brussels against plotting a protectionist power grab with tough new laws of “dubious legality” aimed at stealing business from the City.

The Bank of England Governor said that the European Union could seek to seize part of London’s prized derivatives clearing market in a “very controversial” legal effort that Britain must “resist very firmly”.

Brussels has long had designs on the Square Mile’s euro clearing market, a vital part of trading infrastructure which handles €1 trillion of deals a day. However, Mr Bailey said that EU officials have realised the euro market is too small to be sustainable on the Continent on its own – and could now be considering laws which would force banks to shift other business too.

For the full article, please click on this link:

Andrew Bailey vows to fight Brussels pow
Download • 38KB

Since posting the above article, we have received a press release from Professor Dan Hodson, the Chairman of a newly formed organisation entitled "CityUnited". The press release announces the launch on the 15th February 2021 of the CityUnited Project, a practitioner led initiative setting out a vision of a world leading and prosperous UK financial services industry, setting global regulatory standards in partnership with other major financial centres and in contrast to the increasingly protectionist EU financial services markets.

See here for the press release in pdf:

CityUnited Project Launch 15.02.21
Download PDF • 570KB

Here is also a letter dated 22.02.21 to the Governor from Tim Pope FCA and others on capital adequacy of the EU banks entitled: "Your Mansion House speech and the EU proposal to include software assets as capital."

Andrew Bailey letter from Tim Pope re ca
Download • 44KB

and here is the reply from the Deputy Governor Sam Woods dated 24.03.21:

Letter from Deputy Governor Sam Woods 24
Download • 265KB

Andrew Bailey, Governor of the Bank of England


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