BoE governor, Mark Carney, has responded to the letter submitted by the Treasury Select Committee in relation to the economic and financial costs and benefits of the UK’s membership of the EU. BoE says that, to the extent that it increases economic and financial openness, EU membership reinforces the dynamism of the UK economy. However, increased openness means the UK economy is more exposed to economic and financial shocks from overseas. It also notes EU financial legislation defines many of BoE’s policy instruments and these must be sufficiently flexible and effective to manage financial stability in the UK.
With regard to the negotiated settlement, BoE finds that it:
- acknowledges the operational independence of BoE in the conduct of monetary policy and financial stability, including the provision of liquidity;
- recognises the need to strike a balance between harmonisation within the euro area and the need to preserve flexibility to allow non-euro area members to safeguard financial stability in their jurisdictions; and
- supports the domestic need to maintain overall regulatory coherence and responsibility at a national level in the UK.