In a report published today, UK Finance has provided a detailed analysis of international trade in financial services, the tools that can be used to promote it and the benefits it brings for businesses and consumers.
UK Finance has set out proposals to place the financial services
industry at the heart of the UK's post-Covid-19 economic recovery, with
an ambitious strategy to boost UK exports of financial services.
The UK is the world’s top net exporter of financial services, above
the United States and Switzerland, with a financial services trade
surplus of $77 billion (equivalent to £60.3 billion) in 2019. The
banking and finance industry currently employs over one million people
across the United Kingdom, with over two-thirds of these jobs located
outside of London.
The report identifies seven recommendations for the UK government and
regulators to build on these strengths and promote international trade
in banking, payments and other related services. These changes would not
only benefit the financial services sector but would boost the economy
as a whole, by generating jobs across the country, lowering costs for
consumers and helping firms in other sectors expand into overseas
markets.
The report, International Trade in Financial Services, calls
for a comprehensive strategy on “regulatory diplomacy”, in which UK
financial regulators such as the Bank of England and Financial Conduct
Authority work with their counterparts in other countries towards
improved market access. The aim of this would be to encourage other
countries to open their domestic markets to UK-based financial services
providers and promote cooperation in innovative areas such as AI,
cybersecurity and fintech.
The report also proposes that the UK should use its position at key
international bodies like the Financial Stability Board (FSB) and Basel
Committee to push for global convergence in financial standards, making
it easier for firms to operate across different countries. In addition,
the UK should champion initiatives at the World Trade Organisation to
support global free trade in services, while using new trade agreements
to unlock market access for financial services in key markets such as
Japan and the United States.
David Postings, Chief Executive of UK Finance, said:
The banking and finance sector is a significant
contributor to the UK economy. The industry’s trade surplus is vital,
and we are keen to work with the government and regulators to increase
these benefits for the UK.
“We are setting out the tools available to policymakers to achieve
this, from using regulatory agreements and free trade deals to open up
new markets overseas to playing a leading role at global
standard-setting bodies like the WTO and Basel Committee.
“This would deliver significant benefits for the wider economy as we
recover from the impact of the Covid-19 pandemic, increasing exports in
other sectors, generating jobs and driving down costs for consumers.
“The UK should seize the opportunity to be a global champion for free
trade in financial services, building on our strengths as the world’s
most open and international financial centre.
Gerry Grimstone, UK Minister for Investment, said:
The UK has long been and continues to be a champion of free trade on the world stage.
“Financial Services is one of our most productive and innovative
sectors, helping to drive our economic recovery by creating jobs and
growth across the country.
“I welcome the role that organisations such as UK Finance play in
representing the interests of the Financial Services Sector as part of
the UK’s ambitious global trade policy.
The seven recommendations in the report are:
- Develop a comprehensive regulatory diplomacy strategy for financial services.
The UK has some of the most effective and experienced financial
regulators and supervisors in the world. Their relationships with their
international peers are a key channel for sharing best practice and
shaping the way they develop and implement financial regulation and the
way it treats UK firms that invest and trade.
- Continue to play a leading role in setting international financial services standards. The
single most effective way of driving convergence in financial services
regulation internationally is by shaping the standards that shapes the
rules. As a global financial centre, the UK has championed and led the
work of the FSB, Basel Committee and IOSCO over the last decade and
should continue to do so.
- Build a network of formal platforms for regulatory and supervisory cooperation.
These should be underpinned by formal agreements, protocols for data
sharing and permanent structured dialogues. These can have a particular
value in areas of rapid technological change such as cybersecurity, AI
and digital financial services. Examples include the UK-Switzerland
Global Financial Partnership and the range of ‘Fintech Bridges’ the UK
has established with key partners.
- Pioneer the innovation and expansion of cross-border trading models based on recognition.
With a small number of jurisdictions that match the UK’s high
standards, the UK should explore ways of opening new cross-border choice
and competition based on cross-border supply. The new partnership with
Switzerland is a perfect test case.
- Use a new set of free trade agreements (FTAs) to
lock in UK market access for financial services in key markets, codify
world-class standards for financial services regulation and reinforce
regulatory cooperation and collaboration. The UK-Japan FTA demonstrates
the potential here.
- Champion a range of WTO-level initiatives that will support trade in financial services.
While the WTO framework in this area is unlikely to evolve materially
in the years ahead the UK should remain an advocate of a revived Trade
in services Agreement (TISA) and current work on digital trade and
e-commerce.
- Sustain the UK's openness to imported financial services. UK’s
import regime for financial services both through inward investment and
cross-border supply is very open. This is the right choice for the UK
domestic economy and for the UK as a global financial centre. An open
import regime allows consumers to draw on a wide range of competitive
services, boosting competition and driving down costs. Whatever others do in the years ahead, the UK should sustain its open approach.
UK Finance
© UK Finance
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