The government should increase the scrutiny of financial regulators once Britain leaves the EU and ensure UK rules take into account international finance standards, a major report into post-Brexit regulation has said.
The report, from the International Regulatory Strategy Group (IRSG) and law firm Linklaters, said that after Brexit the UK’s financial regulation system will not have the same resources and oversight as exist in the bloc, and made a series of recommendations to do things differently.
A row is currently raging over how much Britain will diverge from the EU’s financial rules after Brexit, with the issue set to be a major part of the trade talks between the two sides.
A number of high-profile figures – such as former chancellor George Osborne and Bank of England governor Mark Carney – have said the UK should not be “rule-takers” once it leaves the bloc, given the international standing of the City.
Mark Hoban, chair of the IRSG and former Treasury minister, said: “Brexit creates the opportunity and need to review the structures and processes of regulation so that they continue to support global standards and reflect domestic priorities.”
The IRSG report, released today, contained a number of recommendations, including that parliament should have more powers to scrutinise regulators, to make up for the loss of “peer review from other EU financial regulators”.
In particular, it recommended the establishment of a parliamentary committee to specifically oversee the City watchdogs.
Among its numerous other recommendations was that the UK should become more plugged in to international regulations and formally take them into account “where appropriate”.
It said this would “ensure a continued focus by the UK regulators on maintaining their leading role in shaping these standards”.
Yet Barney Reynolds, financial regulations chief at law firm Shearman & Sterling, cautioned against “searching for another supranational architecture”.
“We’re sitting on one of the equal top, or in fact the top, financial centre in the world,” he said, adding that the UK should not bind itself.
A further recommendation of the report was for a simplification and consolidation of the UK’s financial rules. “The pace and scale of regulatory change over the past ten years has led to considerable regulatory overlap, presenting a pressing need for coordination between regulators,” it said.
Julian Adams, director of regulation, at M&G, said that whatever settlement is reached with the EU, the UK’s financial rules are set to change.
“Regulators are almost certain to end up with increased powers, and these should be matched by stronger scrutiny and accountability, to parliament and the public.”