British watchdog expects market disruption if no two-way EU access

By Huw Jones

LONDON, Nov 4 (Reuters) - Markets face some disruption in
January if Britain and the European Union fail to agree on
continued two-way cross-border access, top British regulators
said on Wednesday.

Britain has left the EU and continued full access to the
bloc under a transition arrangement expires on Dec. 31, with the
City of London facing patchy access to the bloc in future.

The EU is still deciding on how much direct financial market
access it can give Britain under a system whereby Brussels deems
British rules to be "equivalent" to its own.

"There is the possibility the negotiating parties don't
reach some sensible conclusions on some issues ... then there
will be some unexpected disruptions," Charles Randell, chairman
of the Financial Conduct Authority (FCA), told a Treasury Select
Committee parliamentary hearing.

"It's absolutely in both negotiating parties interests to
come to recognition that they do have equivalent regimes ... I
am really hopeful that good sense prevails," he added.

Nikhil Rathi, the FCA's new CEO, said there could be
disruption in areas such as derivatives trading if Britain and
the EU end up with conflicting rules on where investors can
trade them.

"We have said we are very open to finding relief there, but
it requires both sides to agree on a way forward," Rathi said

The FCA on Wednesday sought to minimise disruption in
cross-border share trading after the EU said it would restrict
the ability of investors in the bloc to buy and sell EU listed
shares in London from January.

Rathi said he was also checking loan impairments at banks as
the COVID-19 pandemic hits the ability of borrowers to make
repayments, forcing banks to make higher provisions for
defaults, with England going into a second lockdown to fight the
pandemic from Thursday, to hit more businesses.

"We are not seeing any major concern around impairments and
distress ... We are expecting the economic challenges to worsen
as unemployment increases in coming months so we need to remain
vigilant," Rathi said.
(Reporting by Huw Jones;
Editing by Alexander Smith)