Bank of England (BoE) Governor Andrew Bailey has told UK banks to ramp up their preparations for a no-deal Brexit as the UK sticks to its target to strike a deal before the end of the year. Bailey told British lenders to accelerate their planning for a no-deal Brexit scenario in a call to Sky News.
One bank boss said the discussion suggested the BoE has changed its view on the outcome of Brexit trade talks. “It is fundamental to the BoE’s remit that it prepares the UK financial system for all risks that it might face,” a BoE spokesperson said.
“In performing that role, the governor meets the leadership of UK banks on a very regular basis. As we have said previously, the possibility that negotiations between the UK and EU over a future trading relationship might not conclude in a deal is one of a number of outcomes that UK banks need to prepare for over the coming months.”
Prime Minister Boris Johnson has ruled out an extension of the December 2020 deadline to strike a deal despite the pandemic. A request for a one year or two-year extension of the Brexit trade talks deadline must be lodged by the end of this month.
Banks including executives from Barclays, HSBC, Lloyds Banking Group and RBS were on the call with Bailey. These banks already fear billions of pounds of bad debt as a result of the coronavirus crisis, with millions seeking payment holidays on their mortgages and credit cards.
UK and EU negotiators are mid-way through a final round of Brexit trade deal negotiations before the end-of-June deadline. However, there are doubts over whether a breakthrough can be achieved, with negotiators far apart on key issues like fisheries.
The UK has also criticised the EU’s desire for a set of common standards on concepts like workers’ rights, pointing out other EU trade deals do not contain these stipulations.
A news report that the UK was willing to compromise on these flashpoints sent sterling spiking earlier last week. But the PM’s office quickly denied the report, branding it “wishful thinking”.
“We have always been clear there is no question of splitting the difference on level playing field and fish,” the Prime Minister’s spokesman said. Adding: “We aren’t compromising on these, because our position on these is fundamental to an independent country.”
Johnson is set to meet EU Commission chief Ursula von der Leyen by the end of June to hold talks aimed at thrashing out a Brexit trade deal before the autumn.
Bailey has told MPs that a failure to strike a Brexit trade deal is “likely to make trade more costly or difficult relative to a comprehensive FTA, reducing trade flows and foreign direct investment”. Banks’ share prices rose last week as traders gave the FTSE 100 companies a boost after Italy ended its quarantine amid more easing of European lockdown.
(The writer is our foreign correspondent based in the UK. He can be reached at firstname.lastname@example.org)