Chancellor Rishi Sunak has outlined plans for the reform of UK financial services regulation after Britain’s exit from the European Union (EU)
The “once-in-a-generation" reforms set out the government’s vision for “an agile and dynamic approach to regulation that supports the growth of the UK economy”. It also forms part of a wider agenda to review the laws which govern the country.
While the UK was a member of the bloc, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority's (PRA), part of the Bank of England, ability to determine the most appropriate regulatory requirements for UK markets was constrained by strict requirements to apply EU rules.
The move will now rid the majority of EU financial services law that is no longer appropriate for the UK. It will give UK regulators the powers to replace the law with their own rules.
The plans would require the FCA and the PRA to consider both the implications for growth and international competitiveness of their regulations, as well as their existing objectives of maintaining market integrity, consumer protection and a sound financial system, the Treasury department said on Tuesday.
The Treasury is also set to gain new powers which will allow it to force the FCA and the PRA to scrutinise their rules if the government believes the current regime is not “in the public interest”.
As it stands currently, there is no formal mechanism for HM Treasury, or anyone else, to require the regulators to conduct reviews of their existing rules.
“Earlier in the year, I set out my vision for an open, green, and technologically advanced financial services sector that is globally competitive and acts in the interests of communities and citizens across the UK, creating jobs, supporting businesses and powering growth across the UK,” Sunak said.
“One important part of that vision is ensuring, as an independent nation, that we have a coherent, agile and internationally-respected approach to financial services regulation that is right for the UK.
“Today’s proposals will support the future strength of the UK as a global financial centre, ensuring an agile and dynamic approach to regulation that supports the growth of the UK economy, without diverging from our continued commitment to high international standards.”
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The consultation will close on 9 February next year, after which the government will consider the responses.
Michael McKee, financial services regulatory partner at DLA Piper, said: “The UK financial services industry is probably one of the most competitive industries in the world already despite all the difficulties thrown in its way by the pandemic, Brexit and other heavy costs. In a sense it is only really possible to look for those small improvements which give an extra edge – in the way the British cycling team found its way to winning more gold medals.”
It comes as the FICC Markets Standards Board (FMSB), Bank of England (BoE) and FCA separately announced the signing of a tri-party Memorandum of Understanding (MoU).
Andrew Bailey, governor of the Bank of England, said: “I am pleased that we have an agreed MoU that builds on our working relationship with FICC Markets Standards Board to date and sets a clear framework for how we will continue to cooperate in the future.
“The FMSB was a key recommendation of the Fair and Effective Markets Review, and we strongly support its primary aim of raising standards of conduct so that global FICC markets are more transparent, fair and effective.
“The FMSB plays an important role in engendering confidence and trust from users and the public.”
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