Britain’s banks and insurers want to stick to global standards on financial regulation after Brexit and are not calling for a “race to the bottom” to win business from European rivals, the head of Britain’s financial watchdog said on Wednesday.
Charles Randell, chairman of the Financial Conduct Authority, said leaving the European Union could allow London to ease financial regulation but the final trade deal it agrees with the bloc will dictate the extent of any rowback.
Britain departs the EU next March and while a “standstill” transition deal has been agreed with Brussels lasting to the end of 2020, it is unclear what sort of trading links Britain will have with Europe after then.
Some UK lawmakers see Brexit as an opportunity to row back on EU rules, but Randell saw no appetite for this among firms themselves.
“I don’t think any of the financial services firms I meet want to try to win business through a regulatory race to the bottom,” Randell told a Reuters Newsmaker event.
Financial firms believe that the “quality kite mark” they get from being regulated in Britain is an important selling point for their global business.
While Britain is leaving the EU, it is not leaving a system of global standards, Randell said in his first major speech since becoming FCA chair in April.
“It will be my intention to make sure that we redouble our efforts to engage with global standard setters because I think that will be necessary in a world after we’ve left the EU.”
“High standards of regulation will continue.”
Regulators across the world have approved a welter of new rules since banks had to be rescued by taxpayers in the 2007-09 financial crisis.
Randell said there is a consensus among the industry and consumer groups that the volume of regulatory change is unsustainable.
“We need to make sure that the pace of regulatory change is carefully managed, given all the other pressures on firms’ business models,” Randell said in his first major speech since becoming chair of the FCA in April.
There was room to review existing rules for “unintended consequences,” he said.
“If we do see a slower pace of regulatory change, there may be scope to spend a bit more time to examining the consequences regulation have had… and whether all the regulation has served the purpose it was originally intended to serve.”
Britain’s withdrawal agreement with the EU may give scope for this review to take place, he said.
Britain opposed EU rules that cap banker bonuses, saying it was the wrong approach, raising hopes in Europe’s biggest financial center that it would be scrapped after Brexit.
But Britain’s freedom to diverge from European financial rules will largely depend on the “parameters” set by its future trading relations with the EU, Randell said.
The FCA and the Bank of England have said they don’t want to become “rule takers” or be forced to cut and paste EU rules into British law after Brexit, with no room to diverge if it was felt necessary to maintain financial stability.
British Cabinet Office minister David Lidington said on Wednesday that Britain’s services industry must be able to diverge from EU rules after Brexit because there is a risk of “unwelcome measures” that may undermine the sector.
Britain is due to set out its proposals for future trading links with the EU in a White Paper.
(Reporting by Huw Jones and Carolyn Cohn; editing by Mark Heinrich)
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