It would be “unrealistic” and “dangerous” for the UK to stick to EU banking rules after Brexit, Bank of England governor Andrew Bailey has said. 

In his annual Mansion House speech to the City of London, Mr Bailey also warned that proposals to move to a low-regulation model would not benefit the UK’s financial services sector.

An agreement is set to be reached on regulation of banking, insurance, asset management and other financial services business between the EU and UK by the end of March.

Billions of pounds of share trading has already switched from London to mainland Europe and the City is seeking to limit further damage caused by Brexit.

Mr Bailey said in his speech, delivered virtually: “The EU has argued it must better understand how the UK intends to amend or alter the rules going forwards.

“This is a standard that the EU holds no other country to and would, I suspect, not agree to be held to itself. It is hard to see beyond one of two ways of interpreting this statement, neither of which stands up to much scrutiny.”

He added: “It is not acceptable when UK rules govern a system 10 times the size of the UK GDP (gross domestic product) and is not the test up to now to assess equivalence.”

The governor put forward two rule changes the UK plans to make, including tweaks to current EU rules on how small banks calculate assets and on insurance.