Britain will not slash red tape after quitting the EU as the UK’s financial services sector is already highly competitive even with Brussels’ regulations, the Government has told banks.
Even if the UK leaves the EU without a deal there will be no bonfire of regulation, Treasury minister Stephen Barclay told peers.
“We start from the fundamental position, which is we are looking to have a close relationship with the EU which enables access to continue – we are not looking to deregulate,” he said, adding that the aim is to strike a free trade agreement including services industries which will form the basis of any future regulatory changes.
But even without that deal he does not expect to deregulate.
“There were concerns within certain EU27 capitals that the response to a ‘no deal’ from the UK would be a very heavy deregulatory agenda. That is not the intention,” Mr Barclay said.
He told the House of Lords’s EU financial affairs sub-committee that Britain is doing well under the current regulatory setup.
“The regulation we have in fintech, the regulatory approach we have taken, is internationally competitive, and the UK has taken a leadership position there,” he said.
“If I look at some of the other areas where the UK has a global leadership position, on Islamic finance, on green finance, social impact investment – the current regulatory approach hasn’t constrained our ability to be internationally competitive.”
He added that “there is no push from the industry for deregulation,” but instead the aim is to have “agile, evidence-based” regulation to keep pace with new developments and innovations in financial services.
Last week Mark Carney, the Governor of the Bank of England, said there could be room to cut some excessive regulations from the EU.
“There are areas we would make changes, but within the context of maintaining the overall levels of resilience,” Mr Carney told a finance conference.
Mr Barclay indicated that one area this could apply to may be challenger banks – the small or new lenders which face some of the same rules as the biggest banks, even though the upstarts are not a risk to the wider financial system.
However, Chancellor Philip Hammond, speaking late on Tuesday, argued the UK was looking to protect its existing trade deal with the European Union and that this would require a new type of agreement to be drawn up between the two parties, different to that agreed with foreign countries.
“We must develop a new paradigm for our future trading relationship in financial services,” he said, in a speech at the annual dinner of finance association CityUK.
“No existing trade agreement, nor third-country access to the EU, could support the scale and complexity of reciprocal trade in financial services that exists between the UK and the EU,” Mr Hammond added.