With Brexit complete – and many regulatory powers returning to the UK for the first time in decades – it is crucial that we now get the new framework for financial services regulation right.
Britain’s departure from the European Union has created a unique
opportunity to re-shape our regulatory framework for financial services;
setting the sector up for continued success in the years to come and
maintaining the UK’s position as a globally competitive financial
centre.
It is difficult to overstate the importance of financial services to
the UK economy. Employing over one million people, two thirds of which
are employed outside of London, the sector is not only vital for its
contribution to the country’s public finances, but also as a driver and
facilitator of regional and local economic prosperity.
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The benefits of financial services extend well beyond the historic
walls of the Square Mile and its success will be important in supporting
the economy as the country looks to build back better from coronavirus
and deliver on the Conservative Government’s manifesto commitment to
‘level up’ regions across the UK.
Indeed, the Government is wasting no time in realising its ambition
to strengthen the UK’s position as a leading global financial hub.
The Treasury is currently embarked on a number of strategic reviews,
including of our listings regime and on how to make the UK, which is
already a global leader in fintech, the prime global destination for
innovators. This will attract international investment and talent,
creating jobs and boosting our whole economy in the process.
It’s important to remember that this will not be a regulatory ‘race
to the bottom’. As the Chancellor made clear when setting out his vision
for the future of financial services in the UK, we will maintain the
highest global standards as we look to shape the future of the industry.
Read more: Chancellor Rishi Sunak: The City could be set for a post-Brexit Big Bang 2.0
Therefore, getting the framework right is not just about control of
these new powers. We must also establish an effective accountability
mechanism, alongside necessary checks and balances to ensure the rules
that govern the sector are best suited to our own domestic objectives.
The Treasury has been considering this very question as part of its
financial services regulatory framework review, which is a wide-ranging
consultation looking at how financial firms should operate in future.
Whilst we should not look to simply replicate the EU system, we must
ensure regulators remain politically accountable, operating in the best
interest of the wider economy and financial services’ firms. Parliament
should be key to this.
In recent months, this topic has been a key focus of the All-Party
Parliamentary Group (APPG) on Financial Markets and Services, which I
chair.
After a sector-wide consultation,
the APPG has now published a report which sets out how Parliament can
take a central role by helping guide and scrutinise regulators, while
balancing the needs of the sector against wider public policy aims, such
as inclusive economic growth and the UK’s Net Zero ambitions.
At present, Parliament is not set-up to carry out this role. Scrutiny
of the sector currently lies with the Treasury Committee – but its
remit is so broad that it understandably isn’t in a position to carry
out sustained and detailed oversight of technical regulations.
The APPG’s report concludes that a strong case exists for a new
standing Joint Committee of both Houses of Parliament, with a specific
remit for overseeing the financial services sector.
This Committee should be well equipped with a high level of technical
support through expert recruitment, a wide-ranging advisory network and
effective secondments.
I believe that such a Committee will provide appropriate political
accountability and scrutiny, help avoid ill-judged additional
regulations, often implemented without consideration of their broader
impact, and give proper support to one of our most successful
industries.
We
have been handed a unique opportunity to restructure our regulatory
system for the better – we must take it and help prepare Britain for its
new global future.
City AM
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