The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

Industry Group Recommends Rigorous Regulatory Overhaul Post-Brexit

A new report from the International Regulatory Strategy Group (IRSG), supported by Linklaters and industry body TheCityUK, has issued a stark warning on the risks and challenges that the UK’s financial architecture will face in terms of regulatory oversight following its departure from the EU.

The International Regulatory Strategy Group (IRSG) is a practitioner-led group comprising senior leaders from across the UK-based financial and related professional services industry, with the overall goal of promoting sustainable growth. Its latest report, ‘The architecture for regulating finance after Brexit: Phase II,’ (the first iteration of which was released back in 2017) is broadly supportive of the UK’s current regulatory framework, which it notes to be among the most robust in the world and an important competitive strength for the UK.

However, it warns that after Brexit the UK system will not have the same resources, oversight mechanisms or parliamentary scrutiny as exist within the European system – which could create serious issues, especially as the pace and scale of regulatory change over the past ten years has led to considerable regulatory overlap, creating an urgent need for coordination between regulators. However, the rapid requirement to onshore EU regulation and competences ahead of Brexit has inescapably resulted in greater complexity, a lack of coherence, and fragmented responsibilities within the UK’s regulatory framework.

The report makes a comprehensive series of recommendations to counteract these concerns. Some of the key changes would include a formal inclusion of international financial standards within the UK’s regulatory architecture, strengthened mechanisms for holding regulators to account (due to the loss of peer reviews from EU financial regulators), and a strengthened role for the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) statutory panels.

The group also calls for a consolidation of financial regulation to improve accessibility and lower compliance costs – a move that is likely to be welcomed by both industry practitioners and technology vendors alike – as well the introduction of review mechanisms to trach regulatory developments and review new rules and regulations within a set timeframe to ensure they are relevant and appropriate.

Finally, it recommends the creation of a Financial Regulatory Policy Committee with specialist sub-committees and representatives of the full range of stakeholder interests to scrutinise regulatory cost-benefit analyses, along with a Joint Regulatory Committee tasked with ensuring regulatory coordination and coherence and designed to address any air-traffic control issues which may arise between regulators.

“The success of the UK’s world leading financial services sector is underpinned by strong and effective supervision by its regulators. But much of their rulebook has been shaped by the work of European institutions through the implementation of global standards,” says Mark Hoban, Chair of the IRSG, and former Treasury Minister. “Brexit creates the opportunity and need to review the structures and processes of regulation so that they continue to support global standards and reflect domestic priorities.”

The post-Brexit period is likely to be a turbulent one for both financial institutions and their technology providers when it comes to adjusting to a new regulatory landscape. However, should the authorities accept the IRSG advice and focus on increased scrutiny, accountability and consistency as well as ensuring an ongoing dialogue with the industry and removing the twin compliance barriers of cost and complexity, the future could start to look rather brighter after all.

Related content

WEBINAR

Recorded Webinar: Developing operational resilience

Financial institutions’ operational resilience – essentially the ability to prevent, adapt and respond to, and recover and learn from operational disruptions – has come under extreme pressure during the coronavirus pandemic, with last year’s March lockdown creating unprecedented circumstances for financial firms. Employees working from home raised the stakes, as they still do, adding to...

BLOG

Basel III Reforms: ‘Heads in the Cloud’ Time for Financial Institutions

By Alexander Dorfmann, Senior Product Manager, SIX. Cast your mind back to around this time 14 years ago, when a certain investment bank’s share price nose-dived amid major concerns that its short-term liabilities were far greater than its liquid assets. That bank was Lehman Brothers, of course, and its downfall was underpinned by a fundamental...

EVENT

TradingTech Summit Virtual

TradingTech Summit (TTS) Virtual will look at how trading technology operations can capitalise on recent disruption and leverage technology to find efficiencies in the new normal environment. The crisis has highlighted that the future is digital and cloud based, and the ability to innovate faster and at scale has become critical. As we move into recovery and ‘business as usual’, what changes and technology innovations should the industry adopt to simplify operations and to support speed, agility and flexibility in trading operations.

GUIDE

Directory of MiFID II Electronic Trading Venues 2018

The inaugural edition of A-Team Group’s Directory of MiFID II Electronic Trading Venues 2018 offers a guide to the European landscape resulting from new market structure introduced by the January 3, 2018 implementation of Markets in Financial Instruments Directive II (MiFID II). The directory provides detailed profiles of more than 70 venue operators and their...