The European Union is at greater risk than the UK if the two parties are unable to agree a financial transition phase for the City of London after Brexit in 2019, the Governor of the Bank of England, Mark Carney, has warned.

Giving evidence to the Treasury Select Committee, Mr Carney stressed again that it would be "welcome" and "highly advisable" for UK-based financial firms that do business with Continental Europe to receive transition arrangements so they do not lose access abruptly in two years' time.

But he stressed that if this did not happen the greater financial stability risk lay with European states, rather than the UK.

β€œI'm not saying there are not financial stability risks to the UK - and there are economic risks to the UK - but there are greater financial stability risks on the continent in the short term for the transition than there are for the UK,” he said.

The Governor stressed the reliance of European households, governments, corporations and banks on the City.

β€œIf you rely on a jurisdiction for half of your lending [and] half of your securities transactions you should think very carefully about transition from where you are today to where you will be tomorrow,” he said.

The fear in the City is that the UK will leave the single market, meaning UK-based financial firms will no longer be able to sell services to Continental customers.

The UK-based derivative clearing operations are also thought likely to be required to move to mainland Europe after Brexit.

The chief executive of the London Stock Exchange warned yesterday that the UK's vote to leave the EU poses a risk to the global financial system and could cost the City of London up to 230,000 jobs if the Government fails to provide a clear plan for post-Brexit operations.

Asked about the possibility of a regulatory "equivalence" regime for the City of London in the wake of Brexit, which could allow financial business to continue uninterrupted, Mr Carney stressed that "we don't want to be a rule taker as an authority" and for the Bank of England to be required to merely "cut and paste" financial rules made in Brussels and Frankfurt.

”If the EU and the UK starting from the position we are in today when we have the same rules, the regulators are known to each other, it's a tightly wound ecosystem, we're talking about wholesale finance - if we can come to some arrangement roughly along the lines for this - that is an arrangement that can be replicated by both sides for other major financial centres around the world to the betterment of the global financial system," he said.