The British government has announced that the U.K. will look to develop its own regulatory framework separate from EU standards as part of the Brexit regulation.
The stated goal of the new regs will be to create a long-term advantage for doing business in the U.K. for banks, fund managers and insurers.
Brexit secretary David Davis said last week that he believes Britain needs a new regulatory framework for financial services, as without one, the U.K. lacks advantages over their much larger neighbor the EU. This runs counter to the desires of many Londoners, who have requested that Britain retain some sort of regulatory parity with the EU so as to not risk damage to its own financial services industry through companies taking flight from England and resettling elsewhere in the EU.
Davis is instead proposing a standstill period of two to three years after March 2019 — a time period that would allow for current financial relationships to be maintained in general during the Brexit regulation.
A standstill deal was essential, said one senior banker who was at the event with David Davis.
“You need the status quo.”
Still, many were concerned about Britain stepping too far outside the regulatory norms that guide financial services all over the world — with some articulating concerns about a “race to the bottom” encouraged by abandoning equivalent standards in U.K. finance.
Moreover, others noted, sectors such as investment banking and wholesale insurance absolutely require a level field of regulation because such universality underpins mutual access to markets. Retail and commercial banking, they noted, might be easier to divorce from EU regulations — but bankers didn’t seem to be much concerned about so doing.