The outgoing head of the UK’s financial sector regulator has called for the maintenance of the “highest international standards” after the Brexit transition period to safeguard the City of London’s reputation.
In a speech on Monday, Chris Woolard, the Financial Conduct Authority’s interim chief executive, suggested there was no need for the UK to deregulate or diverge from EU rules to retain business.
“The FCA has long been a multilateral player, demonstrating our commitment to the highest international standards ,” he told delegates at the City’s International Financial Services Forum. “We also do what is right for UK markets. The two are not mutually exclusive . . . Maintaining a strong and robust regulatory and supervisory system [goes] hand in hand with the UK’s position as a global financial centre.”
Earlier this year, the UK government announced a continued commitment to high regulatory standards after the Brexit transition period ends on December 31 but indicated that leaving the bloc would allow amendments to certain rules.
Alongside proposals mapping out a regulatory regime outside of the EU, Treasury minister John Glen said: “Now we have left the EU, the UK is making its own decisions about regulation. There will be changes to some of the details.”
EU leaders responded by warning that UK rule changes would make continuing EU market access, which is currently being negotiated, more difficult for London. Pierre Gramegna, the Luxembourg finance minister who favours strong trade links with the City, argued that UK sovereignty in regulatory matters was “in contradiction” with stable access.
Mr Woolard said the rules need not be weakened, no matter what happens in the trade negotiations. “The question for after December is how will the regulatory system look once transition ends, whatever the outcome,” he said — and he claimed maintaining standards and helping UK markets were “mutually supportive”.
However, with the negotiations showing little sign of progress, he told UK financial services groups to be ready for anything. “Continue to prepare — indeed to ramp up preparations — for a range of scenarios,” he said.
Mark Dorff, chair of the international corporate group at law firm
Brown Rudnick, said: “The speech makes it clear that companies should
prepare for a no-deal Brexit, but there is no guidance on what a
no-deal Brexit will actually mean in practice. Therefore, it is very
difficult for many businesses to plan in a meaningful way.”
Mr Woolard will be replaced by Nikhil Rathi, head of the London Stock Exchange’s international development business, next month. His last responsibility before leaving the FCA early next year will be leading a review of the UK unsecured credit market, which he said was much needed amid the coronavirus pandemic.
Despite the mortgage and loan repayment “holidays” that the FCA has overseen, he noted that lower-income households still needed to borrow.
“We can see a real difference in terms of impact on the haves and have-nots in this crisis . . . But for the poorest and most vulnerable in society, there is still a demand for credit,” Mr Woolard pointed out.
He also called for a long-term solution to insuring against pandemics, after the FCA had to bring a High Court action to decide payouts for hundreds of thousands of businesses. “Simply not writing cover may not be the answer here,” he noted. “We as consumers will need to decide if we’re willing to pay, and how.”
But he acknowledged that the regulator had made serious mistakes in its handling of high-profile financial scandals.
Independent investigations into the £236m collapse of minibond issuer London Capital & Finance, the failure of the £118m Connaught Income Fund and the HBOS Reading Fraud are due to report in coming months.
“In the autumn, we will see the results of a number of reviews into potential failures of the regulatory system,” Mr Woolard said. “I have no doubt there will be painful lessons and the FCA will need to learn from them.”