FTI Consulting Public Affairs Snapshot – Regulating the regulations – How will parliament scrutinise post-Brexit financial regulation?Download a PDF of this article
As an EU member state the UK was a rule-taker – even if it was often at the forefront of new financial regulation thanks both to its hard power within the bloc and the size of its financial services sector. With more autonomy outside the EU, this leaves open the question of how parliament will scrutinise and perhaps even influence future regulatory policy, a field in which until now it has played a limited role.
A deal – The state of play
The days are counting down until the UK’s transition period ends on 31 December and the main sticking points to reach a trade deal continue to be fisheries, state aid and governance. Excluded entirely from the negotiations is financial services; a sector which, as things stand, will no longer benefit from the rules and regulations it has relied upon for decades come January.
The City is now holding its breath for ‘equivalence’, whereby the EU and UK recognise each other’s regulatory regimes as sufficiently similar. In November 2020 the UK granted equivalence to the EU for 22 areas of financial services but the bloc has so far only reciprocated on one (clearing houses, which the EU judged too important for financial stability). From January, depending on agreements reached with Brussels (a deal is still important if only for providing momentum to a financial services-specific arrangement), the UK will have a choice between aligning closely with EU rules or diverging to better reflect the British financial markets and make its environment more business friendly.