FCA chief mulls ‘lower burden’ regulation post-Brexit

24 Apr 2019

britain euBritain could benefit from a “lower burden” regulatory regime post-Brexit, says the UK’s top financial regulator.

Detailing his vision for the future of UK financial regulation, Financial Conduct Authority (FCA) head Andrew Bailey said he believed that the UK and EU would take contrasting approaches to regulation post-Brexit.

“Brexit will clearly be a defining factor,” he said. “I do think that, left to our own devices, the UK, with its common law system and large, global financial markets, would construct financial conduct regulation in a rather different way.

“It would, I think, take on board practical experience more rapidly, and it would be based more on principles that emerge from experience in public policy and somewhat less on detailed rules that can tend to become overly set in stone.”

Mr Bailey said that after the UK leaves the EU it would continue to look to improve onshored EU legislation on a “‘same outcome, lower burden basis”.

He noted the different traditions of the English common law system and the European civil law system, led the difference in regulatory stances.

“The common law approach strengthens the need for outcomes-based equivalence rather than a rules-based approach – in other words, the outputs of regulation not the inputs,” he said.

UK-based financial services firms are expected to access the EU market under the equivalence regime, where the EU allows foreign firms access if it deems the rules of their home market are aligned closely enough with its own.

The Financial Times on Wednesday reports: “The City is still waiting for clarity about the extent of access to EU markets after Brexit. The financial services sector has come to terms with the likely loss of valuable passporting rights, which currently allow groups to offer their services across the bloc. But there is considerable uncertainty over the shape of the future relationship.”

Speaking to the media recently, deVere Group CEO, Nigel Green, observed: “With no meaningful access to the EU’s single market, the UK’s financial services sector is bracing itself for what is likely to be a long and steady decline, ultimately losing its coveted ranking as the world’s top financial centre.

“The lack of confidence in the UK’s financial services sector, which contributes around 6.5% to the country’s GDP, will inevitably hit jobs and the government’s tax base.

“The steady drain of investment, talent and activity away from UK financial services might be able to be stopped, the situation might be recoverable, but confidence needs rebuilding fast.”

Stephen Jones, chief executive of industry body UK Finance, said: “We strongly support Andrew Bailey’s vision for the future of financial regulation in the UK, with a coordinated regulatory approach centred on competition and delivering the best outcomes for consumers.”