City minister Andrew Griffith has said the government will be taking a “pragmatic approach” to axing former EU financial services rules for London and take advantage of “select opportunities” from Brexit, in another sign that the Treasury is slowing the pace of its ambitious rule-cutting agenda.
“I don’t seek divergence for divergence’s sake — why would you — generally the UK benefits from its open capital markets,” Griffith told the Financial Times Global Banking Summit. “We remain committed to the highest standards in regulation.”
The government has successfully rolled back EU rules in limited areas for the City since Brexit, most notably Solvency II requirements over insurers’ capital.
“It does make sense to release some of that trapped capital to more productive uses,” Griffith told the summit.
However, regulators have warned since leaving the EU that rushing to axe Brexit red tape for the City could put financial stability at risk.
Prime Minister Rishi Sunak has already ditched a promise to review all EU laws in his first 100 days in charge and shelved a planned Brexit delivery unit in the face of strained resources in the government.
The Treasury has already rowed back on some of the more radical elements of its ‘Big Bang 2.0’ for the City, including on introducing a so-called call-in power that would have allowed it to veto decisions made by regulators or force them to make new rules.
Having pushed back its planned introduction into the Financial Services and Markets Bill earlier in the month “to consider the detail carefully”, the proposal was officially dropped on 23 November.
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Scant information has been provided to explain the circumstances under which the Treasury would have used the power for or what form it would have taken. No draft of the power’s scope or nature was ever made public.
The Treasury on 28 November declined to provide comment on the reasons behind the decision, under what circumstances the government might return to an intervention power, and what such a power might have looked like.
The Treasury is still giving itself the power to direct regulators to review their rules where it is in the public interest as part of the reforms, alongside new secondary growth and competitiveness objectives for the Prudential Regulation Authority and the Financial Conduct Authority. This is in addition to new powers requiring the regulators to notify the Treasury committee of MPs when they publish consultations.
“It’s bringing the rulebook up to date in many respects, not just in relation to EU law,” Griffith said of the Financial Services and Markets Bill, adding that the reforms would offer “more agility for our operationally independent regulators to manage the rulebook”.
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