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The finance ministry has proposed scores of changes to rules governing capital markets, company listings and insurance to exploit independence from EU regulation and create an opportunity for Britain to innovate. Legislation is due this year.
The outlook for the "resilient" financial sector "seems relatively positive", given that far fewer finance jobs than expected had moved to the EU, the House of Lords' European Affairs Committee said in its report.
But committee chair Charles Hay said: "You should be a little bit wary because there's a lot still to play out in this."
Britain is proposing to give regulators a secondary objective of aiding financial sector competitiveness, but Hay said the committee was asking the government to explain exactly how this would work in practice.
A separate parliamentary report last week declined to back the objective, saying it risked weakening standards. read more
Bankers have called on the government to speed up reform, but Hay said it was critical to get the right sequencing to reach the "new place" for a sector that accounts for 10% of total British tax receipts.
"More important than the speed is the final answer because if you rush and do the wrong thing, then you will damage something very precious," Hay said, outlining the report.
British relations with the EU are strained, with UK clearing house access to the bloc set to end in three years. A spat over Northern Ireland has put on ice a new British-EU financial regulatory cooperation forum. read more
While the government would be unwise to bet on "unlikely" future access to the EU for British finance, it should weigh up the benefits of diverging from rules it inherited from the bloc and thereby imposing new costs for companies, the report said.