Ministers have today tabled landmark post-Brexit legislation in parliament that will lay the foundation to scrap hundreds of retained EU rules on financial services.
The long-awaited Financial Services and Markets Bill sets up a mechanism to bin EU financial services regulations one-at-a-time and either replace them with completely new rules or with none at all.
The EU’s Solvency II directive, which forces insurance firms to put a certain amount of capital aside to withstand financial market shocks, is one of the first regulations set to be binned.
The freedom to diverge from EU financial services rules has been described by many Leavers as one of the biggest potential Brexit benefits, with the government keen to boost the City’s international competitiveness.
Former chancellor Rishi Sunak, who drew up the plans before he resigned earlier this month, said the changes could lead to a “Big Bang 2.0” in reference to the deregulatory period of the 1980s that led to huge growth in the UK financial services sector.
Chancellor Nadhim Zahawi said this was “a landmark day” for the City and promised to seize on the “benefits of Brexit to ensure the financial sector works in the interests of British people and businesses”.
The bill enshrines new powers that allow the government to force financial services regulators – the Prudential Regulation Authority and Financial Conduct Authority – to review any decisions they have made.
However, the final decision will still be in the hands of regulators and not ministers.
The post-Brexit legislation will also force regulators to consider the City of London’s “growth and competitiveness” when making new regulatory decisions.
Mils Celic, chief executive of financial services trade body TheCityUK, said: “All reforms should seek to maintain the UK’s reputation for high regulatory standards while preventing gold-plating.
“Maintaining and enhancing the UK’s thriving, internationally competitive financial services sector will help ensure that it can play its full role in supporting important policy goals, like tackling climate change, addressing the cost of living crisis, and levelling up the nations and regions of the UK.”
Andrew Pilgrim, UK financial services partner at EY, said: “The industry’s regulatory authorities are right to remain vigilant about forms of systemic and conduct risk, but at the same time the City must ensure that it does not drop the ball on supporting new growth and championing innovation.
“Overall, the UK needs to ensure it does not fall behind other global financial centres, particularly New York, Paris, and Amsterdam, which are already pushing ahead with reform agendas.”