The City watchdog has set aside £30m to deal with Brexit this year and has admitted it will need to scale back or delay some of its regular work to prepare for Britain leaving the EU in 2019.
Outlining plans to significantly increase its spending on Brexit to help smooth out the process for City banks and insurers, the Financial Conduct Authority said it would drop some “non-critical” projects and focus more of its resources on managing the changes triggered by Britain’s exit from the EU.
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The UK financial services industry faces the threat of disruption as a consequence of the vote to leave the EU, due to its status as Europe’s banking hub. It is also one of the biggest economic drivers for the UK, accounting for around 7% of the economy.
Leading City banks, including Goldman Sachs, are drawing up plans to relocate staff elsewhere within Europe to cope with Brexit, depending on the ultimate deal struck between London and Brussels. This has the potential of causing a headache for the City regulator, as it will be tasked to oversee changes to years of joint regulations covering the entire 28-nation EU bloc.
FCA’s chief executive, Andrew Bailey, said: “There is a lot of work on Brexit, [and] there is a higher level of uncertainty.”
Outlining its business plan for the coming year, the FCA also said it would put increasingly sharp focus on the practices of high-cost credit providers, such as rent-to-own firms and home-credit and catalogue lenders.
There has been a rapid increase in personal borrowing on overdrafts, credit cards and car finance in recent years, returning to levels unseen since the financial crisis, which is increasingly worrying regulators at the FCA and the Bank of England.
Threadneedle Street is preparing to raise interest rates from as early as May, which will put up borrowing costs for consumers. While rates are forecast to only rise at a gradual pace, the FCA said this could have a “detrimental impact” on consumers who carry high levels of debt.