Our regulatory cheat sheet needs a post-Covid rewrite
The success of a financial centre depends largely on the rules it is governed by and the quality of its rulemakers.
The UK’s regulatory regime is widely regarded as one of the best in the world due to its transparency, openness and – crucially – ability to evolve.
Exiting the European Union and the pandemic have reshaped our economy, businesses and households. The speed and scale of this transformation means our regulatory rulebook needs to adapt.
Both Nikhil Rathi, CEO at the Financial Conduct Authority, and Sam Woods, CEO of the Prudential Regulation Authority, recognised this when they addressed senior City figures last week. The former’s focus on international leadership in regulation, with a focus on data and improved operational effectiveness was particularly welcome.
Now that we have left the EU, the FCA and PRA have more flexibility to determine the rules they think are appropriate.
The UK’s regulatory regime must remain open and internationally competitive whilst consistently implementing high global standards. This will ensure continued success.
TheCityUK has worked with the industry to set out a new international strategy for how the UK can regain its position as the world’s leading financial centre. This is designed to put us at the forefront of technology, innovation and green finance, creating more high-skilled jobs across the country.
It also fits with the Chancellor’s vision to make the UK the world’s most exciting financial services hub by focusing on four areas: innovation, sustainability, openness and competitiveness.
On innovation, the UK is already a world leading country having pioneered a regulatory sandbox and open banking.
The Kalifa Review outlined how we can go even further to ensure we are the most open and dynamic place in the world. The Digital Sandbox – a joint initiative by the FCA and City Corporation – recently announced a second cohort aimed at fostering innovative solutions to challenges related to ESG data and disclosures.
Climate considerations are now embedded across all of the UK’s principal financial regulators.
As we approach the Cop26 summit, we must do all we can to ensure finance is green by default. The City Corporation – in collaboration with the Green Finance Institute – will be running a Green Horizon Summit at the summit to mobilise private finance.
Openness is at the core of the City and the UK. The decision to grant equivalence to the EU and EEA Member States was an important step in maintaining that.
As we look to agree new trade relationships with other nations, the negotiations between the UK and Switzerland on enhancing the cross-border market for financial services give us a glimpse of what is possible.
Lastly, when it comes to competitiveness it is vital that the industry ensures the best talent from all backgrounds can get to the top. There is a clear business as well as moral case for supporting diversity.
The government-sponsored Socio-Economic Diversity Taskforce – which I chair – is working to ensure equity of progression so that success is always determined by performance, not background.
Evolution, not revolution, is needed to ensure our rulebook keeps pace with the speed of change in the global economy.
Our regulators have made clear they stand ready to rise to the challenge.