Rishi Sunak believes that the City of London should brace itself for a “Big Bang 2.0” post-Brexit, suggesting a repeat of the sweeping deregulation of financial services under Margaret Thatcher. Recent reviews into areas such as public markets, the fintech sector and ringfencing – a rule put in place to protect the public from risky investment banking activities – are aimed at boosting the attractiveness of the City post-Brexit.
But that does not mean red tape will be removed. Sam Woods, Britain’s top finance regulator, told The Telegraph last year that bankers hoping for a watering down of rules after Brexit are misguided. In particular he vowed to defend the ringfencing rules put in place under his watch “to my last drop of blood”.
Miles Celic, who runs finance lobby group TheCityUK, argues that the sector is not chasing after a “deregulatory agenda”. His comments echo City minister John Glen’s stance that there is no appetite to make markets less safe by slashing red tape. Instead, Celic wants the UK to lead the way on regulation in newer areas such as fintech and sustainable finance.
Celic says: “The EU rules in these areas are much less developed so we have more of a free hand to help set the global standard, rather than having to build a framework that needs to reflect the very different aspirations in what was 28 different markets.
“Competitiveness is about much more than regulation – it’s got to look at issues such as access to talent and a stable, predictable, simplified tax regime.”
Industry insiders say that while they are expecting improvements as the UK scrambles to stand out from EU rivals, Sunak’s vision of a big bang won’t be happening any time soon. Strict rules put in place after the 2008 financial crisis, such as a capping bankers’ bonuses at 100pc of salary, are unlikely to be rewritten amid fears doing so could undermine the UK’s reputation for high regulatory standards.
“I don’t think there will be a big bang moment where everything is done at once – a big reveal – as each of these topics requires careful thought and consultation,” argues Barney Reynolds, global head of financial services at US law firm Shearman & Sterling.
“However, I think key aspects of the system are being rethought, which will lead to a big change. There’s no point having lots of rules that are poorly drafted and in many cases only obliquely achieve a necessary purpose. The rulebook will look very different in three to five years.”
In the short-term, bankers are hoping to free themselves of mundane box-ticking exercises. Reynolds expects the focus to be on “better written and fewer rules” as flaws within the likes of Mifid II, a sprawling set of financial rules, start to grate.
He says: “The fact that Mifid II contains 1.7m provisions says it all. No human being can carry that amount of rules in their head.
“It leads to risk by misdirecting energy. With simplification you get greater and more efficient compliance.”
The City is getting its house in order just as confidence in the UK is rebounding. An annual survey of chief executives conducted by PwC last month found that it is now the fourth most promising market for growth, with only the US, China and Germany ranked higher. After a difficult period leading up to the UK’s exit from the EU, weary finance executives do not want any post-Brexit opportunities to go to waste.