The control over banks

When it becomes clearer that the EU will not allow the UK to seek special access to the single market for its banking industry, the Treasury and the Bank of England are divided over the issue surrounding the City. The Treasury seems willing to give up some of the regulatory power over the City in order to seek for the access to the single market for the banking sector, while the Bank of England seems unwilling to give up its regulatory autonomy. Here comes a question which state will benefit the City more.

For the City, it is its best interest to gain the access to the European single market and it does not care too much about who will become its regulator in the future, as regulation happens anyway. Therefore, the City will support the Treasury to gain its access to Europe. However, if the UK loses its regulatory power over the City, then the City literally becomes part of the European market, and probably the European Central Bank becomes the new regulator. For the Bank of England, this will largely weaken its ability of stabilizing the UK economy over the long term, though it is hard to say whether the Bank of England or the European Central Bank is better at stabilizing the economy and regulating the financial industry. However, for the UK economy itself, it becomes harder to be stabilized when the ECB takes over the role of the BoE as the UK banking sector regulator, as the ECB has to consider the entire European banking industry rather than just the City, the regulations under the ECB are much less specifically targeted for the City.

To conclude, my opinion is that the City will welcome the Treasury’s plan as it gives a greater chance to gain the access to the European single market, but its plan is likely to affect the stabilization of the UK economy over the long term as it loses the regulatory autonomy over the banking sector.