The International Monetary Fund (IMF) has warned the UK that deregulation of the country’s financial services industry post Brexit must not threaten high standards of solvency and behaviour at banks, insurers and markets.
In a 94-page assessment of the UK.’s financial stability, the IMF said there is “tension” over the finance ministry’s intention to give the Bank of England and Financial Conduct Authority a formal objective to aid the sector’s competitiveness.
The global organisation said that Britain should maintain its commitment to supporting the highest standards of prudence and good governance of domestic and international finance.
“Similarly
, while maintaining a competitive financial sector is an important policy goal, financial stability should not be compromised for the objectives of competitiveness,” the IMF said.
The City of London lost business since the country left the European Union two years ago.
Amsterdam retained its share-trading crown at the end of last month over London despite efforts made by the British government to make equity markets more attractive in the post Brexit world.
Last year, the UK government launched it roadmap to promote the UK as a dynamic and agile global financial centre.
This included the FCA and the BoE being asked to “consider both the implications for growth and international competitiveness of their regulations.”
This was seen as trying to give the UK an edge over the EU because regulators in Brussels do not have a mandate to consider growth.
The IMF said that the BoE’s Financial Policy Committee should strengthen its focus on global financial standards.
The UK’s financial sector welcomed the competitiveness objective, which the finance ministry has said will not lower standards, but a senior BoE official said it must not create “booms and busts” in the sector.
Another key area of concern highlighted in the IMF report was the rising costs and impact of market fragmentation in financial service firms due to Brexit
Overall, the IMF assessment concluded that Britain operates a well-functioning financial stability framework with resilient banks and insurers and is well aligned with global standards.
However, it said regulators should maintain Britain’s commitment to mutual cooperation with the EU, including intensifying regulatory dialogue.
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