Regulation of the financial services industry must be overhauled, Britain’s biggest business group believes, arguing that the country needs “smarter” rules for its key institutions after the Brexit vote.
The CBI wants reforms that make the Financial Conduct Authority, responsible for day-to-day supervision, and the Prudential Regulation Authority, which monitors risks across the financial system, work together more closely.
In a report being published today, the CBI says that Britain must ensure that its financial services industry maintains its competitiveness, whatever the outcome of talks about quitting the European Union. It wants authorities to draw up rules that would provide the sector with “certainty and stability”.
“Smarter regulation, not less regulation, will provide certainty to financial services firms, allowing them to adapt in a shifting political and economic climate as well as anchoring our competitiveness as a global financial centre,” Simon Moore, financial services director at the CBI, said.
As well as closer co-operation between the FCA and PRA, which were formed after the break-up of the Financial Services Authority three years ago, the CBI believes that more work needs to be done on what impact regulations brought in since the financial crisis are having on the industry.
A raft of new rules have been introduced as regulators have sought to prevent a repeat of the crash eight years ago. Last month, Andrew Bailey, chief executive of FCA, bemoaned the complexity of regulation, pointing out that the authority’s latest “handbook” of rules now stood more than 6ft tall when printed out in full.
Unlike the FSA, neither the PRA nor the FCA is explicitly charged with ensuring the competitiveness of the British financial services industry. However, the CBI says that regulators should play a more active role in engaging with the firms they oversee and it calls for new initiatives, such as open days and corporate secondments.
“A cultural change is needed to ensure a more practical approach to regulatory shift, through collaboration and engagement, creating a level playing field between smaller firms, who are disproportionately hit by the regulatory burden, and larger companies in the sector,” Mr Moore said.
The FCA has already tried to respond to criticism that tougher rules are stifling innovation and competition with Project Innovate, a programme designed to help companies to navigate the regulatory hurdles to launching a new service.
Yesterday, the FCA announced the first batch of projects to emerge from its “regulatory sandbox”, which included BitX, a cross-border money transfer service that uses blockchain technology, Bud, an online platform to help users to manage all their financial products, and Issufy, a web-based service designed to make it easier and cheaper for a company to launch an initial public offering.