The government will task financial regulators with boosting the City’s competitiveness as part of a push to secure the UK’s status as a leading financial hub.
In a sweeping set of reforms launched yesterday designed to overhaul the regulatory regime shaping the City, the government said regulators would be given a further objective to “facilitate the long-term growth of the UK economy” alongside their existing obligations.
The new rules will also subject regulators to tougher parliamentary scrutiny, which some will see as reining in the regulators’ independence.
Under the proposals, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) will have to launch a wide ranging review of their rules at the Treasury’s request if the government believes the current regime is not “in the public interest”.
The City’s chief lobby group called on the government to go even further in the severity of checks and balances on the FCA and PRA, likely leaving the watchdogs hot under the collar.
Miles Celic, chief executive of TheCityUK, said: “[We] urge the Chancellor to take this even further, committing to a regular independent review of the UK’s financial regulatory regime to ensure that the rules are proportionate [and] coherent.”
Other City bigwigs embraced the stepping up of accountability of the FCA and PRA.
“It is crucial that our regulatory system is agile and dynamic… we welcome the Chancellor’s proposals to strengthen scrutiny,” Catherine McGuinness, policy chair at the City of London Corporation.
Wonks at the FCA and PRA have also been tasked with solving the post-Brexit regulatory hangover by replacing legacy EU laws governing the City, which is likely to take “several years,” the Treasury estimated.
Regulation will have to protect the “international competitiveness” of Britain’s financial services industry, the Treasury said. Nikhil Rathi, the boss of the FCA, has already committed to building a more agile regulator that maintains the UK’s reputation as a “great place to do business.”
However, the Bank of England has repeatedly urged the government not to impose a formal competitiveness remit on regulators due to concerns it could trigger a return of softer regulation that partly led to the financial crisis.
Chancellor Rishi Sunak said the shake up “will support the future strength of the UK as a global financial centre.”
The proposals sparked concerns in the City that the FCA and the PRA will struggle to meet the government’s demands due to chronic underfunding.
Tim Dolan, partner at Reed Smith, told City A.M.: “Without adequate resources the regulators cannot make the UK’s regulatory framework succeed in the nimble and competitive manner that the Treasury may envisage.”