First salvo fired in what is likely to be battle over UK’s regulatory future

Amid record temperatures in the UK, and wildfires in Europe the past week has also seen the first real indications of what the future regulatory regime for the United Kingdom’s financial services will look like.

On Wednesday the Financial Services and Markets Bill was presented to Parliament by the Government and given its First Reading.

It gives the broad indication of what the market can expect in terms of the future regulatory requirements but it has a good deal of reaction.

Jonathan Herbst, global head of financial services regulation at law firm Norton Rose Fulbright, said he believed the new rules will see the UK look to clearly differentiate itself from the European Union’s regime, and with it may well come new rules and demands that the industry will need to be not only aware of but also prepared for well before their implementation.

“Anyone who thought that post-Brexit there would be a period of inactivity needs to change their view. The Bill is proof of the seriousness of the divergence agenda from the EU,” he explained. “The new powers of the regulators need to be seen in this context. All the devil will be in the detail to follow but this is nothing less than the beginning of the development of a new UK regulatory regime.

“Financial institutions and others, such as technology companies and other critical third parties, now need to position themselves to ensure that they can operate within this new regulatory landscape.”

Christopher Croft, CEO of LIIBA said they key needed to be the ability for the London market to remain competitive with its international peers, adding the regulatory burden needed to be lightened and the regulator itself needed to be fit for purpose and big enough to effectively manage the sector.

“The London market is the leading global centre for commercial risk and reinsurance but other international centres are snapping at our heels and doing business in the UK is increasingly seen as having a greater burden of regulatory costs,” Croft explained. “Government legislation for a regulators’ competitiveness objective is welcome but will only work if matched by a strong culture, capacity and capability in the regulator. We would like to see the legislation include a requirement for metrics to be set and reported on by the regulators, to incentivise and track concrete action on competitiveness.”

What is becoming clear is that the UK Government is keen to create clear water between the UK and the EU’s regulatory regime. It is likely they will see to gold plate the UK’s systems to reinforce the financial services sector’s global reputation.

However, this may welcome at a cost and the warnings issued over the increasing regulatory burden and its impact on the ability to compete will need to be heeded.

Jon Guy, Editor

Emerging Risks