Britain should not be “short-sighted” and copy European Union rules just to keep financial activity in London, Bank of England executive director for financial stability Alex Brazier said on Monday.

The City of London was cut adrift from the EU market on Dec. 31 and has yet to be granted “equivalence” or market access by Brussels.

“Equivalence that signs up to being a complete rule-taker is potentially very problematic from a financial stability perspective,” Brazier told a Reuters Newsmaker forum.

They are the BoE’s first comments since Britain and the 27-country EU agreed on Friday to a framework for informal regulatory cooperation, seen as a first step before Brussels considers any equivalence access.

Euro stock and derivatives trading worth billions of euros daily has left London for the bloc and Brazier said equivalence would not make much difference given it does not cover a vast range of activity.

“Have a bit of confidence, don’t try and take measures to just keep business here, but let’s stay committed to an open, global financial system,” Brazier said.

He is standing down after a decade at the BoE, where the aftermath of the last financial crisis, Brexit and COVID-19 have dominated his work.

Britain needs a blueprint for dealing with future economic crises, given there may be little headroom for cutting interest rates next time round, Brazier said.

“So a new ‘recession policy playbook’ may be needed.”

The BoE cut interest rates to a record low of 0.1% as the UK went into its deepest recession in three centuries last year due to lockdowns to fight the pandemic.

The government also stepped in by granting payment “holidays” on mortgages and paying companies to furlough staff to avoid mass unemployment.

If fiscal policy is going to take more of the burden in future, mechanisms will be needed to co-ordinate monetary and fiscal policies to avoid “underlaps” and “overlaps” in policy, Brazier said.

Utopia

Banks have kept credit flowing to businesses and households over the past year, but are reluctant to tap their capital buffers despite calls from the BoE to do so as losses on loans are set to mount.

Brazier said reform to bank capital rules could help overcome such reluctance in a crisis.

“My utopia is simplifying bank capital … bank capital rules are just too complex,” Brazier said.

Global regulators are also debating whether stricter rules are needed for “non-banks” or funds after central banks had to inject liquidity to avoid markets freezing a year ago when economies went into lockdown to fight the pandemic.

But it may be more difficult to achieve global consensus for reform compared to the rapid deal on new bank capital rules after the financial crisis over a decade ago, Brazier said.

The BoE is due to hold the world’s first “climate” related stress test for banks and insurers.

“Over time you can imagine the test getting tougher and there being capital consequences,” Brazier said.