Brexit will provide the UK with a “remarkable opportunity” to change its financial services regulation in a bid to make the City more competitive globally, according to a cross-party group of MPs.
A report from the All Party Parliamentary Group on financial services said the UK must not shy away from diverging from EU rules if it “stands any hope of remaining ahead of the chasing pack”.
The report also called for a new Westminster committee to scrutinise the UK’s new ability to set financial services regulation.
“This could mean ensuring global competitiveness is embedded in the general principles set for the sector’s regulators, while at the same time retaining oversight to ensure the highest possible standards are maintained,” the report read.
The financial services sector, which is worth £130bn a year to the UK’s economy, lost its previous EU-wide access at the end of the Brexit transition period on 31 December.
This has led UK-based banks to shift a trillion pounds of assets and thousands of jobs from London to EU capitals.
It is now unlikely the EU will restore previous access to the UK’s finance firms, in a process called equivalence, as Brussels believes the UK will diverge from its regulatory regime for financial services.
The All Party Parliamentary Group on financial services chair Bim Afolami wrote in City A.M. that not having equivalence granted should be seen as an opportunity to compete with other global financial centres through regulatory reform.
“With Brexit complete – and many regulatory powers returning to the UK for the first time in decades – it is crucial that we now get the new framework for financial services regulation right,” he said.
It comes as Amsterdam surpassed London as the largest share trading centre in January in the wake of the UK’s exit from the EU’s single market and customs union.
There are widespread fears that this could be the first step in London losing its crown as Europe’s largest financial capital.
Barclays chief executive Jes Staley said last week that the City needs “to be focused on New York and Singapore” post-Brexit and not the EU.
“I think Brexit is more than likely on the positive side than on the negative side,” he told the BBC.
“What the UK needs and London needs, is to make sure that the City is one of the best places, whether [it is in terms of] regulation or law or language, or talent.”