John Penrose issues warning at EU red tape holding back Brexit
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After leaving the EU Britain effectively copied over large amounts of previous EU regulation, however attention has been increasingly focused on which areas can be reformed or removed entirely. Successful examples already have been the Kalifa and Hill Reviews looking into the UK’s rules around stock exchange listings and ways to make them more competitive. Recommendations from these reviews have already been taken up by the Financial Conduct Authority in a bid to make the City more attractive for firms looking to make their stock market launch. As the UK looks to cut red tape though, it is attracting attention from Brussels.
European Commission financial services chief Mairead McGuinness said the EU was “watching the UK’s plans for its financial services sector with interest.”
In comments to the Irish Independent, she added: “Deregulation of financial services has no place in a financial system which is already too opaque.”
The EU however has begun to review its own review of regulation, looking at its Solvency 2 rules which govern the amount of money insurance companies are able to use for investments.
Solvency 2 has been cited as an area ripe for reform in the UK with the Association of British Insurers estimating as much as £95 billion could be freed up and invested in areas such as key infrastructure projects and net zero.
Mairead McGuinness said the EU would be ‘watching’ the UK’s plans for regulatory reform (Image: Getty)
The UK has been looking at ways to reform or remove EU financial regulation since Brexit (Image: Getty)
The fact the EU is itself looking at changes to the framework has sparked concern the UK could fall behind the EU on competitiveness if Solvency 2 is not adequately updated.
Governor of the Bank of England Andrew Bailey has described the case for reform as “clear”, commenting: “I do not for a moment consider that the Solvency 2 we transposed from EU law and regulation is best suited to the UK.”
As the UK and EU increasingly diverge on regulation one idea put forward has been a joint Financial Regulatory Forum, similar to those currently existing between the EU and countries such as the US, Japan, Switzerland and Canada.
Such as forum would allow proposals for regulatory changes to be discussed and resolve any impacts on access.
Bank of England governor Andrew Bailey has said the case for reforming Solvency 2 is ‘clear’ (Image: Getty)
It has already attracted support from the City of London’s Irish born Lord Mayor Vincent Keaveny.
In recent comments Mr Keaveny has rejected claims that City jobs have been lost as a consequence of Brexit, saying: “We think it’s a very small number, in the region of 7,500.”
In the run up to the referendum a number of predictions were made on the potential for firms to relocate to EU countries to maintain access, taking jobs and staff with them however Mr Keaveny suggested in fact the opposite had occurred.
“We’ve also seen tens of thousands of jobs being created on the fintech side of the City which has made any job losses or job relocations on the Brexit side relatively insignificant in the overall scheme of things.”
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City of London Lord Mayor Vincent Keaveny has suggested a UK EU forum on regulatory reform (Image: Getty)
The EU however is increasingly looking to try to move more business into the bloc with Ms McGuinness trying to end the reliance of EU banks on the UK for financial services.
Currently, banks across the continent remain heavily dependent on London’s clearing houses for transactions with the EU now having extended temporary access arrangements until 2025
Recently Mc McGuinness insisted there would be no further extension beyond this date with a consultation launched on how to make EU clearing houses more attractive to banks and take business away from London.
The challenge remains uphill though with some banks reportedly indicating they would rather use New York clearing houses if access to London ended.
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