Many of those who supported a Leave vote in the Brexit referendum often speak about the bureaucracy of the European Union and argue that once the UK has left the bloc, businesses will flourish as they become free from the shackles of Brussels red tape.
However, any financial services firm hoping to see a reduction in their regulatory burden post-Brexit may be disappointed, if the recent comments of the Chair of the Financial Conduct Authority (FCA) are anything to go by.
Addressing the Association for Financial Markets in Europe Annual Conference in early October 2018, Charles Randell suggested that his organisation would continue to co-operate with international authorities on common standards of regulation.
Mr Randell commented:
“The FCA does not see the UK’s withdrawal from the European Union as an opportunity to join a race to the bottom in regulatory standards – quite the contrary. 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.”
Ten years after the global financial crisis, the FCA chair also cautioned against any temptation to impose lighter regulation. In his speech, he referred repeatedly to the cycle of deregulation, crisis and regulation, and summed up this concept by saying:
“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. Are we condemned to repeat this for eternity, or can we break the cycle?”
Mr Randell added that the consumer credit market was one where additional regulation became necessary following an event that led to widespread consumer detriment. Here, noting that a previous cap on interest charges was repealed as far back as 1974, he commented:
“The rise of a group of payday lenders combining slick advertising with loose affordability criteria and excessive interest rates led to widespread consumer harm and the eventual re-imposition of a cap in 2015.”
He also said that when evidence of consumer harm is identified, it does not necessarily mean that new rules need to be introduced, and that it may suffice for the regulator to instead increase supervision of whether existing rules are being followed by firms, and to take enforcement action against those who are failing to comply; alternatively evidence of poor consumer outcomes could prompt the FCA to use its competition powers.
In conclusion, Mr Randell said of the FCA:
“We remain committed to high standards of regulation in the UK and to contributing to high global standards. Consumers and businesses need high quality, stable and predictable regulation.”
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