City minister sets out post-Brexit reform of financial services

Andrew Griffith, the Metropolis minister, has pledged that the “Edinburgh” bundle of post-Brexit reforms for the monetary companies business will make the sector “as internationally aggressive as attainable”.

On Friday, chancellor Jeremy Hunt will launch wide-ranging consultations on guidelines for monetary companies as a way to discard EU requirements and make the Metropolis extra aggressive in opposition to world rivals.

The reforms, at first dubbed Large Bang 2.0 by ministers, vary from loosening insurance coverage guidelines underneath the Solvency II regime, releasing some retail banks from ringfencing their operations, and loosening EU-imposed Mifid 2 curbs on analyst analysis that restricted protection of firms and deterred buyers.

In an interview with the Monetary Instances earlier than the announcement, Griffith mentioned the proposed modifications would enable the UK to “maintain or make the most of new alternatives, new improvements, new methods of constructing markets extra liquid and efficient”.

He promised that the reforms can be the “first out of the block making the most of Brexit freedoms”. Different sectors, comparable to life sciences, will observe.

Griffith highlighted a few of the proposals within the 30-point reform plan. They embrace “retiring” packaged retail funding and insurance coverage merchandise (PRIIPS), consulting on a brand new central financial institution digital foreign money utilizing blockchain expertise, and exploring the best way to speed up settlement of trades in London in order compete with quicker US rivals.

Griffith mentioned the federal government would launch a session of the 2016 senior managers regime however added this may not abandon having “some kind of fit-and-proper particular person regime” to make sure these in positions of energy had been accountable and succesful.

Different areas embrace a brand new inexperienced finance technique and plans to provide the Monetary Conduct Authority energy to supervise scores on environmental, society and governance.

New UK long-term asset funds — an open-ended construction that permits funding in illiquid belongings — will even be launched.

Griffith mentioned a lot of the work can be delivered in 2023, setting a timetable way more speedy than is feasible within the EU, the place rule modifications often take years to agree and implement.

Griffith mentioned the UK was “blessed with high-quality regulators” however that “it was proper that we lay down the framework and if the framework says that we need to pursue development and have internationally aggressive monetary markets, then that’s completely proper”.

He added: “It’s not for ministers to make these operational judgments for them. They make these every day.”

The UK’s post-Brexit method to rulemaking offers regulators extra direct energy than they’d underneath the EU regime, the place extremely detailed rules are agreed at political stage.

Regulators have promised to be extra “agile” and attentive to the wants of business and to evolving market dynamics. Finance executives and lobbyists say such a change might have extra impression than particular person rule tweaks.

On financial institution ringfencing, Griffith mentioned the federal government would implement a earlier evaluate of the system that will “not abandon ringfencing [but] is trying in the long term at how [it] sits alongside the decision regime . . . it talks about, for instance, taking a few of the retail-only banks out”. 

Ringfencing was designed to insulate the retail arms of banks from losses of their riskier buying and selling companies. Nevertheless, the prevailing rules additionally apply to banks comparable to Santander, TSB and Virgin Cash, that are overwhelmingly engaged in retail banking.

Metropolis executives have lengthy known as on the federal government to keep away from a “bonfire of pink tape”, as soon as touted as a advantage of Brexit. World monetary corporations flock to London for the excessive requirements in governance demanded by their house regulators.

Griffith pressured the necessity to keep excessive requirements of regulation: “When you have a look at the bundle of measures that we’re taking a look at, it isn’t a wholesale abandonment or retirement of the rule guide in any respect.”

He added: “We’ll all the time compete on the premise of the highest-quality regulation in alignment with worldwide requirements.”