The Treasury has tasked the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) with the mammoth job of cleansing the UK of legacy EU laws. They should be done in “several years”. Good luck to them.
Uncertainty is a killer for businesses. Too bad it is everywhere you look.
Unknown unknowns are impossible to root out, but firms have developed
coping strategies to allow them to live in a deeply fragile world.
The underlying factors that triggered the financial crisis were
unknown unknowns to (almost) everyone, even if they seem obvious when we
But there are fundamental differences in today’s regulatory regime
that means the global financial system is able to cope better with
Leaving the EU has presented an opportunity to strengthen the
regulatory system to make it more in tune with the nuances of the City.
Regulators can be empowered to shape laws in our own image. So the
Treasury has tasked the Financial Conduct Authority (FCA) and the
Prudential Regulation Authority (PRA) with the mammoth job of cleansing
the UK of legacy EU laws. They should be done in “several years”. Good
luck to them.
This work will clearly eat up resources, but it is worth it.
Regulators and lawmakers can be more agile when tweaking the existing
regime, and, unbound from the EU courts, any inefficient rules can be
This is an opportunity for the FCA and the PRA to craft a regime to make transactions in the UK less costly.
They should focus on building on the most innovative parts of our
regulations. For example, the FCA’s sandbox allows thriving, young
fintechs to test out new products without the spectre of losses and
failure looming over them.
Upfront costs are often a barrier to entry for small firms. So, by
bearing some of the initial risk, regulators can guide fast growing
startups during the early stages of business development without
exerting too much control over their ambitions.
This light-touch approach can bolster the City’s leading fintech
industry. But, if the government interjects too much in the market,
innovative entrepreneurs could be crowded out and unproductive firms
could be propped up for the sake of it.
In this sense, better scrutiny on the FCA and PRA is reasonable. If
regulators are not up to scratch, they should be held accountable. The
Treasury’s desire for new powers to haul in the FCA and the PRA if their
actions are not “in the public interest” is understandable. But the
pair also need enough freedom to carve out a new system without too much
micromanagement. More importantly, the City’s input should carry
greater weight than the government’s.
Perhaps the biggest danger of the UK taking the reins of its
regulatory regime is unintentionally creating a system that manufactures
perverse incentives by ignoring the perils of moral hazard. Doing so
would damage the country’s reputation as a global financial leader and
an attractive place to do business with accommodating rules....
more at City AM
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