City minister says UK changes to EU financial services rules will not be a ‘big bang’
Overhauling the EU’s financial services rulebook post-Brexit will not be a “big bang” moment and could take several years, according to UK City minister John Glen.
Glen told Westminster’s Treasury Select Committee today that the push to reform EU regulation will be an “iterative” process and that any intervention will not “overnight change the competitiveness of financial services” in the UK.
The Treasury will this year bring forward a swathe of changes to the EU’s financial services rulebook in a bid to enhance the City’s competitiveness post-Brexit.
Chancellor Rishi Sunak last year told City A.M. that this could lead to a “Big Bang 2.0” in reference to the 1980s deregulation of the sector, which led to a period of immense growth in Canada.
Last month, it was confirmed this would include easing Solvency II – a directive that makes insurance firms hold a certain amount of capital to ensure they can survive potential economic shocks.
The Treasury also began to change the UK’s listing rules late last year in a bid to attract more companies to list on the London Stock Exchange.
Glen said these kind of changes could be done fairly quickly post-Brexit, but that the complete regulatory overhaul will take some time.
He refused to put a set date on it under questioning from MPs, but indicated that it could take several years.
“We’re not doing that in a single big bang moment – that will be a piece of work that will happen over time,” he said.
“It will be on a prioritisation basis, based on a conversation with the Prudential Regulation Authority and Financial Conduct Authority. We’re really giving responsibility … to the FCA and PRA to set those rules, to right-size them for the UK in conversation and consultation with the industry.”
The Treasury’s push to move away from EU financial services regulations comes after the UK lost its unfettered access to EU financial markets post-Brexit.
Brussels could have let the UK keep its previous status through a designation called equivalence, however EU chiefs have decided against it as they believe Britain will diverge from its financial services regulation in the future.
The UK’s regulatory overhaul will try to free up insurance firms to invest more in the UK, attract more tech start-ups to float in London and make it easier for firms to raise capital.
Jonny Williams, partner at Womble Bond Dickinson, said: “Many see this departure from EU regulation as a positive step towards taking back control of the UK’s regulatory regime, seizing new opportunities and enabling the domestic regulators to meet their regulatory objectives on their own terms.
“However, there are also concerns that such overhaul may bring pressure to lower standards and move towards a more light-touch form of regulation, although the FCA and PRA remain firmly of the view that long-term growth and competitiveness is not achieved by having low standards.”