The UK government is now moving ahead with its plan to replace European Union financial services law with the Financial Services and Markets Bill, which was first mooted in the Queens Speech in May.
Nadhim Zahawi, Chancellor of the Exchequer, said the Bill, which runs over 300 pages, is a “landmark day for financial services in the UK.”
He added, “We are repealing hundreds of pieces of burdensome EU regulations and seizing on the benefits of Brexit to ensure the financial sector works in the interests of British people and businesses.”
The long-trailed reforms were dubbed by Zahawi’s predecessor and Conservative Party leadership contender Rishi Sunak as a ‘Big Bang 2.0’, a reference to the deregulation of stock trading in the 1980s which placed the City of London at the heart of Europe’s financial industry.
However, many of the Bill’s core elements, such as regulating stable coins and easing insurance capital rules, echo steps already taken by the EU.
The Bill will give regulators such as the Financial Conduct Authority (FCA) significant new powers, according to Ben Blackett-Ord, executive chairman at Bovill, “With power comes responsibility and the government and parliament need to consider carefully how to hold them accountable.”
He added, “This extra responsibility falls to a regulator that we have witnessed to be stretched from a capacity and staffing standpoint.
Although the Bill represents a golden opportunity for UK financial services, there is a need to urgently address the staffing and culture challenges at the regulator if it is to successfully regulate to the global standard to which it aspires.”
The regulators though may also face challenges as the Bill allows ministers to “call in” decisions by the Bank of England that they do not like. This essentially grants them power to intervene over financial services regulation.
Not surprisingly, this has been a contentious issue with Bank of England governor Andrew Bailey voicing his opposition to the ‘call-in’ power, while FCA CEO Nikhil Rathi said in a letter sent to chancellor Nadhim Zahawi yesterday (19 July), that although the regulator supports the Treasury’s plan to move away from EU rules, outcomes from the framework must not “undermine its operational independence”.
Overall, many market participants have welcomed the Bill, which could become law by next April or May. There were concerns that the UK was losing its competitive edge in the post Brexit world.
Amsterdam has already overtaken London as Europe’s top share trading centre, prompting Britain to ease listing rules as it tries to persuade chip designer Arm to have a London listing.
Adam Farkas, chief executive of the Association for Financial Markets in Europe (AFME), said it was pleased to see the introduction of a new secondary objective on international competitiveness and economic growth for financial services regulators.
He added, “AFME also welcomes, in particular, the proposed legislative change to remove the share trading obligation (STO) and the double volume cap (DVC).
These features were not conducive to supporting secondary market liquidity and their removal will help to boost the attractiveness of capital markets in the UK, making them more agile and promoting better outcomes for investors.”
