It’s no secret that the financial regulators have had their hands full with Brexit over the past year or so. But while much of the attention has been focused on surviving the coming apocalypse, thought is now beginning to turn to what comes next. According to Andrew Bailey in a recent speech setting out the FCA’s future approach, the future could be much ‘less burdensome’ than the present.
As I write this, Britain has put aside its usual obsession with Brexit with something just as divisive, just as convoluted, but containing more dragons: Game of Thrones. For the past few seasons the characters have been increasingly concerned about the upcoming invasion of an army of undead from the North. Although some are no doubt excited about the lack of bureaucracy involved with an ice zombie-based society, most have been desperately trying to work out how to survive it. Only now are they tentatively looking at the world beyond.
So far that has been the case with the FCA. They’ve spent millions in preparation for just about every connotation of Brexit they can think of running all their multiple fan theories to ensure they are covered come what may.
This month, though, the FCA’s Chief Executive Andrew Bailey, talked about how he sees regulation after Brexit. The UK, he said, would focus on a less burdensome approach after Brexit. Had the UK evolved separately from the EU, he said, the current regulatory environment would have looked very different from the highly rule-based structures we’ve seen coming out of the EU.
An important example he pointed to was MiFID II which was developed with collaboration between the UK and the member EU states. However, this means the regulations were not designed for one territory, but 27 which all differed in nature and maturity. That could explain some of the difficulties involved with implementing the regulations in the UK this year.
“I do think that, left to our own devices, the UK, with its common law system and large, global financial markets, would construct financial conduct regulation in a rather different way,” he said.
Instead, the UK would follow what he described as an ‘outcomes-based’ approach which was based on learned experience and policy but less dependent on inflexible rules which could be set in stone.
Even so, the UK still plans for close cooperation with Europe after Brexit and expects to access the European market on the basis of equivalence in which access is granted based on a common acceptance of the rules of the game. He also argued for a dispute resolution scheme to be set up in case equivalence were to be removed by either side.
This is not, then, a race to the bottom but, he claims, a different approach to the same ends. To borrow another hackneyed analysis from Game of Thrones for a moment, it’s like the difference between the books and the TV Show. Both are apparently heading to roughly the same destination, they are just taking slightly different routes to get there.