Brexit - you can rarely go a day without hearing this word. But what does it mean in real terms for financial professionals? The FCA has acknowledged that a looming Brexit will have implications for how the FCA works in the future and has begun to discuss its plans.
Like a large number of people in the UK, the Financial Conduct Authority has begun to turn its mind to life after Brexit. Chair of the FCA, Charles Randell, has outlined the regulator's plan for a potential shake-up of its rules following the UK's departure from the European Union.
Speaking at the Association of Financial Markets in Europe's annual conference on 2 October 2018, Mr Randell confirmed that any regulatory change in the wake of Brexit should be "phased and co-ordinated in a proportionate way". The announcement came just days after the comments of John Glen, the Economic Secretary to the Treasury, who stated that that the government will do “whatever it takes” to ensure the City’s role as a global financial centre continues. This would include new schemes relating to regulation and tax. The FCA however is aiming to avoid too many new regulations after Brexit.
The FCA appears committed to ensuring high-standards remain and has warned against the watering down of those regulations that were brought into force after the latest financial crisis in 2008. This, Mr Randell suggests, would be a great mistake, suggesting that "the seeds of the next crisis" would grow should watering down take place. "After each crisis, we bring in a weight of new regulation. We push it up the hill to implementation. And then we deregulate. And then a new crisis starts the process all over again."
The regulator also suggested that 'reinventing the wheel' isn’t the best practice. New rules should not always be written, when existing ones are already in place. “We must keep an open mind about our existing regulation and be ready to make it better where it is not producing the outcomes we need to produce,” Mr Randell reiterated.
Whilst kneejerk reactions will not help the financial sector, changes will undoubtedly need to be made in the aftermath of Brexit. The FCA will need to work closely with other EU member states to ensure regulatory standards are maintained. Mr Randell summed up by confirming that “We will need to redouble our engagement with our policymaking and regulatory colleagues in Europe and across the world, to continue to influence global standards of financial regulation.”