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A City minister has warned Britain’s financial services regulators to step up their game ahead of the launch of wide-ranging reforms designed to make London a capital markets powerhouse in the wake of Brexit.
In similar letters to the chief executives of the Financial Conduct Authority, the Financial Regulator and the Prudential Regulation Authority, the Bank of England’s regulatory arm, Andrew Griffith stressed that the government wanted “world-leading . . . operational effectiveness from its watchdogs.
“I would welcome an update on your plans to increase transparency on . . .[your]Efforts to be world-leading in terms of operational effectiveness,” he added.
Treasury officials said there was dissatisfaction among City executives with the speed and delivery of financial services regulators, prompting the minister’s unusual intervention ahead of the government’s unveiling of reforms this week.
Griffith told the Financial Times that the government’s efforts to boost the City of London also include ensuring that existing rules are enforced in a “timely and effective” manner.
The warning shot to the FCA and PRA comes as Chancellor Jeremy Hunt prepares to unveil a 30-point plan to boost the British financial sector in the wake of Brexit on Friday.
Hunt has dubbed the package the “Edinburgh reforms” after the Scottish capital where it will be announced, eschewing the “Big Bang 2.0” terminology adopted by his predecessor Quasi Kwarteng.
The original 1986 “big bang” financial services deregulation passed by Margaret Thatcher’s government was far-reaching and transformative, while Hunt’s package is expected to be more modest.
Hunt’s colleagues said the “Edinburgh reforms” designation was meant to serve as a reminder that financial services is an important UK industry, with vibrant centers outside the city of London.
“We want to use smart, sensible, common-sense regulatory reform to encourage investment in UK plcs from every corner of the world because that is our core,” Chief Secretary to the Treasury John Glenn told a London conference on Tuesday. “Adaptive and dynamic governance” is needed to benefit the UK economy and industry.
“I also want to put to bed today the opportunity once and for all that this is deregulation for the sake of control,” he added. “And I say clearly that there is no race to the bottom.”
The proposals are expected to include a review of the EU’s main financial market law, Mifid II, which set tough and often prescriptive rules to reform markets after the 2008 crisis.
City executives have complained that sections of Mifid II have only marginally benefited and created layers of red tape. In particular, critics have said the regime stopped publishing research on companies in the UK after “unbundling” these costs from investment and brokerage services to banks and brokers.
This has starved many smaller companies of the in-depth research coverage that is especially attractive to investors.
Some of the reforms – including changes to the EU’s Solvency II regime for insurers and the Mifid II review – would not have been possible unilaterally when Britain was in the EU.
However many others, such as changes to the “ringfencing” regime for investment banking operations, could be carried out by Britain regardless of Brexit.
In response to Griffiths, the FCA and PRA chief executives both said they would take steps to improve transparency around their operational effectiveness. They said they would more frequently publish data on the time it takes to process authorization applications, a bugbear for the industry.
Both agencies declined to comment beyond responses from their chief executives, but a person familiar with the FCA’s position denied there was any “strain” on operational efficiency, as the FCA has publicly said it has reforms in place.
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