Brexit offers an opportunity for lawmakers to throw off the shackles of legacy EU regulation that has held back the City, according to a report by a group of cross-party MPs published today.
The UK can tweak the regulatory regime inherited from Brussels or design an entirely new system to boost the Square Mile’s banks, brokers and insurers, the treasury committee said.
Britain did exert strong influence over the creation of financial services rules when it was part of the EU, meaning policy makers do not have to rip up the whole rulebook, the committee recommended.
But, boosting the UK financial service sector’s competitiveness should not come at the detriment of watering down rules created in partnership with the EU to prevent the mishaps that triggered the financial crisis, the committee warned.
Mel Stride, Tory MP and chair of the treasury committee, said: “The financial services sector is at a turning point, with regulators taking on new powers following the UK’s exit from the EU.”
“While it is vital that regulators are not leant on to inappropriately water down regulations, and the committee will remain vigilant in this area, there are likely to be real opportunities to lessen regulatory burdens without weakening standards,” he added.
“It is also important that the regulators have an objective to promote growth, not just for the financial services sector, but for the wider economy.”
London and Brussels have yet to reach an agreement which will enable finance firms based in Britain and the EU to do business with each other, known as an equivalence arrangement.
The committee said the government should not encroach on the Financial Conduct Authority (FCA) and Prudential Regulation Authority’s (PRA) independence, but recommended the pair should have a mandate to boost UK economic growth.
The FCA should also focus on removing barriers for vulnerable groups who struggle to access financial products at competitive prices.
“The overarching goal of the UK’s regulatory framework review must be to stimulate a regulatory culture which is robust, fair, competitive, and customer-centric,” Miles Celic, chief executive of TheCItyUK, said.
“All reforms should seek to prevent gold plating and, where appropriate, support the regulators in driving convergence towards global standards,” he added.