LONDON: Britain’s new finance minister Nadhim Zahawi on Wednesday tabled legislation aimed at boosting the post-Brexit competitiveness of the country’s powerful financial services industry, while still maintaining internationally respected standards.
Here are the main points of the eagerly awaited bill, which still has to be debated by British MPs but critics have already denounced as “reckless” deregulation.
Breaking from Brussels
The bill repeals hundreds of pieces of retained European Union law.
In its place, new UK rules will establish “a coherent, agile and internationally respected approach to financial services regulation that works in the interests of British people and businesses”, the government said in a statement.
Making the annual Mansion House speech on Tuesday, Zahawi proclaimed UK financial regulation “will once again be decided in the United Kingdom, for the United Kingdom, by the UK’s expert, independent regulators”.
He is following in the footsteps of predecessor Rishi Sunak — now running to succeed outgoing Prime Minister Boris Johnson — who previously promised a “big bang” in the sector following the deregulation of the 1980s.
Regulators under pressure
The bill puts the industry’s regulators, the Financial Conduct Authority (FCA) and the Bank of England, under pressure, with increased scrutiny of their actions by parliament and the finance ministry.
In particular, the government will be able to order the pair to review their regulations where they deem it in the public interest.
Zahawi said ministers were considering going further and intervening directly in financial regulation, traditionally the sole remit of regulators.
That is fuelling fears of a power struggle between the government and the Bank of England, where officials have recently reiterated concerns over their continued independence.
Growth objective
The bill also assigns a secondary objective to the regulators: promoting the financial sector’s growth and competitiveness, raising fears that this could distract them from their main task.
“We’re encouraging a greater focus on our medium to longer-term productivity,” Zahawi argued as he lauded the idea in his Tuesday speech.
Accepting Stablecoins
The bill would also allow certain types of stablecoins, the cryptocurrencies that are supposedly pegged to the dollar, to be regulated as a payment method in Britain.
The UK government sees this as a way to boost the country’s attractiveness in the emerging crypto-economy.
Reforming Solvency II
The UK government had already unveiled reforms dealing with the regulatory requirements on insurance companies, particularly in terms of capital, which have so far been governed by Europe’s Solvency II Insurance Directive.
London plans to further relax the capital requirements for companies in the sector, hoping to release tens of billions of pounds for so-called “green” investments and infrastructure.
Contrasting reactions
For months, academics and parliament’s relevant watchdog committee have aired concerns at the direction of travel, fearing London is headed too far towards deregulation.
Some have raised the spectre of the 2007-2008 financial crisis.
The charity Positive Money, which campaigns for the financial system to enable “a fair, sustainable and democratic economy”, denounced Zahawi’s remarks Tuesday.
“It’s a sign of the deep ties between the Treasury and the private financial sector that the new chancellor is pushing ahead with a reckless deregulatory agenda despite warnings from senior regulators including the Bank of England governor,” it said.
But sector professionals are applauding, with industry-led lobby group TheCityUK, arguing the bill is not “deregulatory”.
“It looks at a number of areas of specific regulation, many of which are also currently under review by the EU,” it said.
The body branded the bill “a vital part of the engine to help the UK keep pace with our global competitors”, adding it would ensure “the UK maintains its strong reputation for quality, while also becoming more agile and responsive”.
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