RegulationFeb 28 2020

Govt sets out hopes for future of financial services

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Govt sets out hopes for future of financial services

The government has set out its hopes for the future of financial services regulation once the UK's transition period with the European Union ends later this year. 

In a policy paper published yesterday (February 27) Downing Street said a future agreement should "promote financial stability, market integrity and investor protection", including a legally binding obligation on market access and fair competition. 

The UK left the EU in January and the countries are currently in a transition period which will end on December 31, after which the Prime Minister promised "economic and political independence" for the UK.

Negotiations with the EU concerning any future relationship are set to begin next month and in yesterday's policy paper the government said it was seeking an agreement similar to the type already agreed with the likes of Canada, and one based on "friendly cooperation between sovereign equals". 

The government said any agreement between the UK and EU after December should provide a "predictable, transparent, and business-friendly environment for cross-border financial services business". 

The policy paper read: "The agreement should also build on recent precedent, such as the EU-Japan EPA and international best practice, by establishing regulatory cooperation arrangements that maintain trust and understanding between our autonomous systems of regulation as they evolve." 

Mark Turner, managing director of compliance and regulatory consulting at Duff & Phelps, said the policy paper suggests this government is striking a "more comprehensive and aggressive stance" than its predecessor. 

Mr Turner said: "The government highlights that the trading arrangements already in place with counties outside the EU do not bind them to EU regulation in financial services and beyond.

"This appears to be the UK government’s view on the position they want for the UK."

Equivalence would see the UK and EU recognise each other's regulatory standards in some areas, but yesterday's policy paper reiterated previous commitments to carrying out "unilateral" equivalence assessments for the financial services market.     

The government said: "The fact that the UK leaves the EU with the same rules provides a strong basis for concluding comprehensive equivalence assessments before the end of June 2020."

Mr Turner added:"As many of us suspected, the government implies that it is looking to ease regulatory burden as the UK exits the EU.

"Being able to have more autonomy on regulatory affairs certainly looks like a 'red line' for the UK government, as it looks to the UK’s future role on the global stage outside the EU."

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