In another U-turn, the UK government abandoned plans to give ministers the power to overrule City regulators such as the Financial Conduct Authority (FCA) and Bank of England (BoE).
The prime minister Rishi Sunak had proposed a controversial new so called “intervention power” in the Financial Services and Markets Bill which is currently making its way through parliament.
It would have given the government the power to amend or revoke rules proposed by the watchdogs and also to issue instructions.
The aim was to bolster the financial services industry’s standing in the post Brexit era.
However, BoE governor Andrew Bailey warned its would seriously undermine the independence of financial services as well as risk financial stability.
Meanwhile, Sam Woods, head of the BoE’s Prudential Regulation Authority, told a City audience last month, that “A power which allowed ministers to override regulatory decisions just because they took a different view of the issues involved would represent a significant shift away from a model of independent regulation.”
He added, “Some might think that such a power would boost competitiveness. My view is that through time it would do precisely the opposite, by undermining our international credibility and creating a system in which financial regulation blew much more with the political wind.”
Announcing the U-turn, City minister Andrew Griffith said, “The government has decided not to proceed with the intervention power at this time.”
Griffith said existing provisions in a new financial services bill were sufficient to allow Britain to “seize the opportunities of Brexit by tailoring financial services regulation to UK markets to bolster our competitiveness”.
“We have always been keen to find the right balance between increased responsibility for the regulators, with clear accountability, appropriate democratic input and transparent oversight,” added Griffith.
Market participants though would like to see the government tackle the issues caused by the UK leaving the EU and to further advance the innovation needed for the City of London to be more cutting edge.
As Daniel Carpenter, CEO of Meritsoft, a Cognizant company, put it. “MPs and regulators alike really need to start fleshing out the detail of what this post-Brexit Big Bang 2.0 blueprint will look like in practice.
If the Big Bang of the 80s was the precursor to a front office tech revolution, these reforms must look to today’s technologies, including cloud and AI, to automate the capture and processing of trade data in the back office.
Alex Knight, Head of EMEA, Baton Systems: “Now that we know that the FCA will continue to maintain independence, the industry needs to switch its focus towards the specifics of the Big Bang 2.0 reforms.
There is clearly a major need for a post-trade technology transformation, in the same way that the original Big Bang changed the front office from human to electronic trading.”
