BREXIT: Changes in financial regulation likely to stem from international initiatives and not just the EU, says FCA chairman

Out-Law News | 04 Jul 2016 | 12:16 pm | 2 min. read

Future regulation of financial firms in the UK is likely to be based on "increasing international convergence" and acting "where possible in concert with the rest of the world – including the EU", the chairman of the Financial Conduct Authority (FCA) has said.

This is part of Out-Law's series of news and insights from Pinsent Masons experts on the impact of the UK's EU referendum. Watch our video on the issues facing businesses and sign up to receive our 'What next?' checklist.

John Griffith-Jones said that while he cannot say at the moment “exactly what, if anything will change” in relation to future UK financial regulation policy as a result of the UK's vote to leave the EU, previous successful regulatory policies implemented in connection with international initiatives highlights why it will remain important for the FCA to work closely with global financial services bodies and regulators around the world. 

"The prudential regulatory changes made to end ‘too big to fail’ have been driven at an international level, and have had to be in order to be effective," Griffith-Jones said in a speech in London on Thursday. "The UK has been highly influential, but not dominant, through the quantum and quality of its input, helped, of course, by Mark Carney’s wise chairmanship of the Financial Stability Board. I suggest that many of the really major changes in both markets and conduct regulation in the future will be driven in a similar manner. We increasingly see this happening."

"Concrete examples include anti-money laundering, benchmark regulation, response to cyber-crime, technological developments in trading platforms, enforcement coordination and the emphasis on increased personal responsibility," he said.

In his speech Griffith-Jones said that "there is a need for an industry led 'collective' strategy view to emerge" of what the best way forward from the Brexit result is for UK financial services and the wider UK economy. He said two reports, by prominent industry figures Wyn Bischoff and Bob Wigley, published in the aftermath of the financial crash in 2008 had "helped to steady the ship, plot the outline of a future course".

"There must be value in your carrying out a similar exercise again now, over the summer, to identify at least the broad brush strokes, if not all the technical details, of alternative plans," Griffith-Jones said. "The position is uncertain and it will not be settled for some time. But it is important for firms to resist the temptation to cite chicken and egg - 'we cannot design a strategy without knowing the rules'."

"It is important for the UK that, at the appropriate moment, you are able to inform the government where your major opportunities and risks lie, along with other industries, as it forms its plans for the negotiation of our exit. The FCA will, of course, be working closely with the other authorities in this process," he said.

Griffth-Jones said that while London faces competition from other financial centres for its business, it has benefits and attractions.

"I continue to believe that the reputation of the London marketplace for fairness, and of its participants for straight dealing, are sine qua nons for its continued success, especially operating outside the EU," he said. "There is significant competition for London out there. But the UK has some important advantages, not least the depth of liquidity, provided by the critical mass of participants, and the pool of expertise of its people. They are valuable, but they are not immutable."

Griffth-Jones' comments on London came as Douglas Flint, chairman of HSBC, confirmed that the bank has no plans to relocate its headquarters from the UK capital in light of the result of the UK's Brexit vote, according to a report in the Financial Times.