In a significant speech entitled "The ideal post -EU regulatory framework" delivered on 10 March 2020, Dr Victoria Saporta, Bank of England Executive Director of Prudential Policy, gave expression to some thought leadership as to what should be the structure of prudential regulation of the UK financial services sector post - the so-called transition period ending on 31 December 2020 following the UK's exit from the EU on 31 January 2020.
This is a complex subject , which Dr Saporta points out will certainly be evident at the end of the transition period, in the sense that "the UK will be left with the same complex set of EU law and regulations on-shored in a way that replicates the rather unique way the EU - as a supranational institution - [regulates]the area of financial services." Dr Saporta argues that the EU system of financial services regulation is a "patchwork" with prudential regulatory requirements sitting "in a dispersed variety of places: primary legislation, a range of statutory instruments, on-shored binding technical standards, and PRA rules and guidance".
In his 2019 Spring Statement, the then Chancellor of the Exchequer, Philip Hammond, announced that HM Treasury would be reviewing the post-Brexit financial services regulatory framework and Dr Saporta's speech seems a noteworthy step in that direction. Her view is that dynamism, time consistency and legitimacy are the three criteria to be taken into account in deciding the appropriate prudential regulatory framework for the financial services sector. In this, she was extrapolating from the six principles for a post-Brexit prudential regulatory regime outlined by Sam Woods, Bank of England Deputy Governor for Prudential Regulation and Prudential Regulatory Authority CEO, in a sppech in May 2019, namely:-
- Robust prudential standards
- Responsible openness based on international collaboration and standards
- Proportionality and sensitivity to business models, and promoting competition
- Dynamism and responsiveness
- Accountability .
Dr Saporta's conclusion is that the best model to satisfy all these requirements is the establishment of an independent regulatory body with a clear mandate set out in primary legislation and a clear set of accountability mechanisms to the UK Parliament.
This is all very technical stuff and how it will subsume within it all the plethora of different regulators, which currently exist, is not detailed in Dr Saporta's speech and yet the general trend towards streamlining regulation post- Brexit , as reflected in Dr Saporta's speech, may be welcomed by many in the financial services industry...so long as there is no suggestion of re-inventing the wheel for its own sake.
There is clearly more content to follow in this debate in due course.