Something has changed in financial services. The events of the last week have put this beyond doubt. In the aftermath of the Brexit referendum, we were focused on designing a deep and comprehensive relationship with the EU based on alignment. When that was rejected, we hoped for the significantly less comprehensive equivalence determinations. As the Chancellor pointed out, clearly, on Thursday, “that has not happened”.
At the same time as we continually try to strengthen our ties with the EU following our “long history of co-operation”, we will now also need to look further afield. We will deepen regulatory co-operation with our close allies, the US, to whom we already export $28bn of financial services per year, and we will need a mature and balanced relationship with China and its £40tn market. India and Brazil are also in our eyeline.
Exercising our “sovereign” power will, of course, mean change. We are no longer holding our breath waiting for equivalence. We will focus on what we do best – innovating in financial markets to make them open, competitive, technologically advanced and green. This is what we can expect from our “new chapter in financial services”.
As the Chancellor said, “we now have the freedom to do things differently and better, and we intend to use it fully”. Importantly, he provides reassurance that “the EU will never have cause to deny the UK access because of poor regulatory standards”. This is about smarter regulation more tailored to our markets. We need to work from what hasn’t worked in the past and look forward and innovate for the future.
Those interested in financial regulatory policy will be very busy. The very structure of regulation is being considered in the Treasury’s Future Regulatory Framework. Legislators are not waiting for the implementation of that before thinking about specific changes. We have reviews of crypto assets and stable coins, the payments landscape review, the wholesale markets review and the review of prudential requirements for insurance. This has now been overlaid with a roadmap for our future direction of travel.
Nikhil Rathi, CEO of the FCA said last week that he would be looking at all the FCA Rules to ensure they are fit for purpose in the post-Brexit world.
There is a very welcome resetting of the financial services industry at the heart of policy. Former MEP Kay Swinburne has just taken over as the Chair of the Council of the International Regulatory Strategy Group. Yesterday, the IRSG published a report on Britain’s access regime, exploring how to make it more simple for overseas firms looking to operate in the UK. At the launch event, Treasury minister John Glen committed to consulting on the new rules.
The path to get here has not been easy and the way forward will not be without its challenges. But the determination of the financial services sector, and those leading it, to become more international and more open, will stand us in good stead to have a competitive advantage over our foreign counterparts.