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The chief executive of the Prudential Regulation Authority (PRA) has warned new Treasury committee leader Nicky Morgan that a cliff-edge Brexit could force the regulator into 'difficult prioritisation decisions'.
The warning came in a letter from head of the PRA and deputy governor of the Bank of England, Sam Woods, following the PRA's recent survey of financial firms that undertake cross-border activities between the UK and EU. It set out a series of issues which he suggested could 'pose a material risk' to the regulator's objectives.
Woods cautioned that fragmentation of market-based finance could result in higher costs and less activity, and highlighted the UK's withdrawal from the EU as having the potential to affect the economy.
He also suggested that restructuring by firms to mitigate risks to their businesses would increase complexity.
In a final point, Woods told Morgan the authorisation and ongoing supervision of a significant number of additional firms was likely to overburden the PRA's resources. 'It is incumbent on us to manage this burden but we may have to make some difficult prioritisation decisions in order to accommodate it,' he said.
In response Morgan said: 'The UK leaving the EU is a complex task. The potential extra burden on the PRA’s resources, and the risk that may pose to its objectives, is an issue that I’m sure the committee will want to monitor.'