UK Parliament
The UK-EU relationship in financial services - The House of Lords European Affairs Committee publishes report - 23 June 2022
The House of Lords European Affairs Committee (the Committee) has published its first report of session 2022-23 on the UK-EU relationship in financial services. In the report, the Committee concludes that the overall outlook for the UK financial services sector post-Brexit is positive.
The Committee notes that London has retained its position as the world’s second largest financial centre, and that far fewer financial services jobs have moved from the UK to the EU as a result of Brexit than some had anticipated. However, the Committee warns the government against complacency as “it is not yet clear whether the impact of Brexit on the sector has fully played out”.
Commenting on the absence of EU equivalence decisions, the Committee observes that whilst this is “a political, rather than technical, approach on the part of the EU”, the UK financial sector has not viewed this as a matter of fundamental concern. As such, the Committee cautioned against basing the UK’s strategy for financial services on the equivalence process, which is not only outside of the government’s control, but is also unlikely to bear fruit. It further raised concerns about the EU’s increasing emphasis on “open strategic autonomy”, as this “focus on control and market location is philosophically different to the UK’s approach, and…could increase barriers to cross-border trade in financial services”.
The Committee also notes that “the government seems reluctant to recognise the importance of the UK-EU relationship, seeming unwilling to fully engage with the EU institutions, or to acknowledge that developments in the EU still have significance for the UK”, and urges the government to conclude a Memorandum of Understanding (MoU) on regulatory cooperation with the EU as a mechanism for strategic dialogue.
Finally, the Committee welcomes the government’s plan to give more powers to the financial services regulators, subject to appropriate mechanisms for scrutiny and accountability, as this will allow for more flexible and proportionate regulation. It also urges the UK to establish new rules in forward-looking and novel areas such as fintech and green finance where there is currently limited regulation.
Press Release
House of Lords (European Affairs Committee) First Report of Session 2022-23: The UK-EU relationship in financial services
Future parliamentary scrutiny of financial services regulations - House of Commons Treasury Committee publishes Report - 23 June 2022
The House of Commons Treasury Committee (the Committee) has published its report on future parliamentary scrutiny of financial services regulations (the Report), following the UK’s withdrawal from the EU. The Report follows the Committee’s July 2021 report entitled ‘The Future Framework for Regulation of Financial Services’, which concluded that, “it would not be proportionate for Parliament or its committees to carry out, as a necessary part of the rule-making process, the detailed and comprehensive textual scrutiny which the European Parliament’s Economic and Monetary Affairs Committee conducts.”
The Report sets out how the Committee will examine new regulatory proposals for financial services. It notes that, following the UK’s withdrawal from the EU, the number of regulatory initiatives will grow as regulators assume responsibility for drafting measures that would previously have been drafted by the European Commission.
The Committee believes that the most effective point at which it could intervene in the development of financial services regulatory proposals would be the consultation paper stage, when proposals are in draft texts but when there is still scope for influence through amendments. It plans to establish a sub-committee to lead the scrutiny of regulatory proposals, which will have the power to “send for persons, papers and records”, will be able to seek written evidence and take oral evidence, and be able to agree reports which would then be delivered to the full Committee for consideration. Factors that will be considered by the sub-committee include the following:
- Is the policy justified and desirable? Is the balance between service providers, consumers and others the right one? Do the benefits outweigh any drawbacks?
- Is the regulator acting within their delegated power?
- Is the drafting of the necessary standard?
The sub-committee will take a view on what form of scrutiny is appropriate for each regulatory proposal. The Report notes that, for maximum flexibility, the Committee will initially appoint all of its members to the sub-committee, which will be chaired by the main Committee’s chair.
The sub-committee will commence its work by scrutinising the PRA’s proposals for a ‘strong and simple framework’, which will amount to a significant change in prudential policy applying to banks and building societies. The sub-committee plans to invite written submissions and take oral evidence on the proposals before the summer recess starts on 21 July 2022.
House of Commons Treasury Committee Report: Future Parliamentary scrutiny of financial services regulations
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