UK Consults on Post-Brexit Regulatory Framework for Financial Services

The consultation proposes a blueprint for the future regulatory framework that more clearly allocates responsibilities between Parliament, HM Treasury and financial services regulators.

UK Economic Secretary to the Treasury and City Minister John Glen has announced the launch of the second phase of the Financial Services Future Regulatory Framework Review.

In light of Brexit, the review will determine how the UK's financial services rules are made, who is responsible for making them, how stakeholders can have their say, and how those making the rules are scrutinised and held accountable.

"Over time, much of our regulatory approach to financial services has been prescribed by EU legislation and this has not always been appropriate for the UK's financial services industry," Glen said. "As we seek to build a global role outside of the EU, we now have the option to regulate differently and regulate better."

The consultation paper says the current approach removes primary responsibility for designing and maintaining regulatory standards from the expertise that is concentrated in UK regulators, making it difficult to flex or update these standards quickly to respond to changing conditions.

"It has led to an unclear allocation of responsibilities across Parliament, HM Treasury and the regulators and resulted in a fragmented rulebook for firms, with regulatory requirements spread across different forms of legislation as well as regulator rules."

The consultation proposes a blueprint for the future regulatory framework that more clearly allocates responsibilities between Parliament, HM Treasury and financial services regulators.

The government sees the UK's departure from the EU as an opportunity to review framework arrangements and ensure the overall approach to regulation of financial services is "right for the UK" on a standalone basis.

Simultaneously, Glen announced the launch of a review of the prudential regulatory regime for insurance firms, known as Solvency II.

"The UK's insurance sector is the fourth largest in the world and plays a critical role in the UK economy – but the current regime was designed with the entire EU insurance sector in mind," he said.

"This review will provide an opportunity to ensure Solvency II is appropriate for the unique structural features of the UK's insurance sector and our overarching regulatory approach."

The review is underpinned by three objectives: to spur a vibrant, innovative, and internationally competitive insurance sector; to protect firms and their policyholders; and to support insurance firms with capital and investment consistent with the government's climate change objectives.