Head of US SEC urges UK and EU to prevent market disaster from no-deal Brexit

The head of the US Securities and Exchange Commission (SEC) is warning the UK and European Union this week to take action to prevent a market disaster in the wake of a no-deal Brexit.

The SEC’s chairman Jay Clayton told the Financial Times he wanted to see clear actions to keep important market functions operating smoothly even if the UK falls out of the EU in March without a formalised deal.

“Some period of adjustment would be good,” he told the FT, noting that he was concerned about areas including investment management and non-centrally cleared derivatives contracts.

Clayton said he planned to assign more SEC staff to work exclusively on Brexit-related issues as he worries that the risks of a no-deal Brexit are rising.

“Let me put it this way, I think it’s prudent for me to spend time thinking about what that means,” he told the FT.

The Bank of England (BoE) has said for months that the biggest British banks could withstand a messy no-deal Brexit and have enough cash to keep operating.

BoE governor Mark Carney has repeatedly stressed that the UK’s financial sector is resilient, though he has warned that the central bank would not be able to fully rescue the economy if the UK crashes out of the European Union in March 2019 with no deal.

The central bank has also raised concerns about the smooth operation of the massive UK derivatives market, which is intertwined with the EU.

Clayton’s new statements on Tuesday come after he warned publicly last week about the risks surrounding Brexit.

“The potential adverse effects of Brexit are not well understood and, in the areas where they are understood, are underestimated,” he said during a speech in New York.

He added it would be a “tall order” for the EU and UK authorities to minimise market disruption and costs.

With files from Reuters