The latest stage of the Government’s Future Regulatory Framework (FRF) review, titled ‘Proposals for Reform’, was a welcome early Christmas present. Now, I know that this is not what most of you would have asked for but, as chief executive of the London Market Group, the importance of this consultation in exploring how the UK regulatory framework for financial services needs to adapt cannot be underappreciated. In a post Brexit world, the FRF is therefore vital in ensuring the UK’s regulatory framework can facilitate future growth of our market.
What was very welcome was that the Government has changed its long-established position on an International Competitiveness Duty for the UK regulators. This has long been on my (and many others’) Christmas list, and is now proposed as a secondary statutory objective. But here I am going to go a bit Grinch – this on its own is not enough. We need competitiveness and growth objectives to result in a change in the culture and behaviour of the regulators. That is why our attention is now on how we can ensure that the duty has the necessary ‘teeth’ to be effective and to make a difference to the UK’s competitive position.
To change the culture, we need a “welcome mat”, and we need active Government and Treasury support for not only new businesses wanting to invest in the UK, but for established players who are looking to increase their footprints. We also need transparency and accountability – metrics which show how the regulators are performing against their objectives and full accountability to Parliament against those objectives and metrics.
According to all good management books, that which gets measured gets done. We would like Treasury – whose reforms these are after all, to be very specific in how the regulators demonstrate that they are really paying attention to competitiveness, not just paying it lip service. And the good news is that we don’t have to reinvent the wheel, other regulators around the world with similar duties produce annual reports, as well as benchmark themselves against others.
The lump of coal in the FRF was the lack of focus on proportionality, with the risks that the UK continues to have a ‘one size fits all’ approach to how it treats different sectors and types of customers. A classic example of this is the FCA Pricing Review. This was a measure designed to aid consumers in the home and retail markets – a real problem that needed solving, but one which is totally unnecessary for corporate clients accessing commercial products. Despite the best intentions, all this has done is piled on more costs and burdens on London Market brokers and damaged our competitiveness.
So, that leaves us with New Year’s resolutions. For the LMG no new year diet plan is needed. Instead, I’m working towards the next deadline for input into the FRF process in February. We will continue driving our messages home with Ministers and parliamentarians, as well as working with other representative bodies in the City to build a coalition of support. It’s then incumbent on the Government to respond in a timely manner, and we will do all we can to ensure it does.