Exclusive: Sunak to unveil plan to slash EU financial services rules in Mansion House speech
Rishi Sunak will unveil his plan to slash EU financial services regulations in a major set piece Mansion House speech next month.
Morning Wire understands the chancellor will announce details of his Financial Services and Markets Bill at the City’s annual Mansion House bankers’ dinner on 19 July and will introduce the legislation to the House of Commons before parliament rises for summer recess on 21 July.
The package of measures, which Sunak has said could start a second “big bang” for the City, aims to maintain the UK’s global competitiveness as it diverts from the EU financial services rulebook post-Brexit.
High-profile Brexiteers, including Jacob Rees-Mogg and Lord David Frost, have said diverging from the EU’s financial regulations is one of the largest potential benefits of Brexit.
Sunak’s speech will give him an opportunity to focus Tory backbenchers on what the government is doing on Brexit amid disatisfaction of the UK’s economic direction amongst the right of the party.
The bill will outline plans to ease the EU’s Solvency II regulation, which forces insurance firms to set aside a certain amount of capital in order to withstand economic shocks, and is expected to include a new clause that will force financial services regulators to promote competitiveness and economic growth.
City minister John Glen said earlier this year that the change to Solvency II will free up tens of billions of pounds of private sector investment for insurance firms.
It is also expected that there will be tweaks to the EU’s MiFID II directive, which forces investment firms into greater transparency when reporting transactions and payments.
A senior Treasury source said a new regulatory regime for cryptocurrency will also be included in the bill.
“It’s not de-regulation, but it’s about finding the right balance for a future framework on crypto,” they said.
Parliament is expected to debate the bill from September.
Some campaigners, including former Liberal Democrat leader Sir Vince Cable, have warned that making regulators promote the City’s international competitiveness will lead to a “race to the bottom” and leaves the UK at danger of experiencing another financial crash.
Mel Stride, Tory MP and chair of Westminster’s Treasury Committee, said there was a “natural tension between safety and soundness and lightening regulation to improve our international competitiveness”.
Stride’s committee announced yesterday that it would oversee parliamentary scrutiny of the government’s changes to financial services regulation.
Emma Reynolds, managing director of public affairs and policy at TheCityUK business group, said the competitiveness directive was the most important element of the post-Brexit changes.
“We think our regulators need to take into account that we are in a very competitive global environment now,” she said.
“But, we don’t think consumer protection and international competitiveness should necessarily run counter to each other. Some commentators have suggested that by ‘competitiveness’ we mean a race to the bottom or deregulation – we’re not calling for that.
“For example, we need regulators to grant authorisations on time and without delay because in other jurisdictions that’s what they do. If it’s taking 12 or 18 months for authorisation for a senior manager or fund or exchange, and that’s longer than our competitors, then that’s damaging for our competitiveness.”
The bill comes after a House of Lords Committee today said the row over the Northern Ireland Protocol was holding back further cooperation on financial services between the UK and EU.
The two sides were supposed to sign a Memorandum of Understanding (MOU) last year on financial services regulation, however this has been stalled by the Northern Ireland row.
The MOU would create official channels for regulators in the UK and EU to share upcoming decisions.
A Treasury spokesperson said: “As announced in the Queen’s speech, the forthcoming Financial Services and Markets Bill will enhance our position as a global leader in financial services, capitalise on the benefits of Brexit by cutting EU red tape and promote a competitive marketplace which spurs investment to deliver for individuals and businesses.
“The bill will be introduced when parliamentary time allows.”