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LONDON (Reuters) -British financial regulators will have to promote the global competitiveness of the country’s financial sector, though a plan for more government oversight of their work has been put on hold for now, finance minister Nadhim Zahawi said on Tuesday.
Zahawi confirmed that a long-awaited financial services and markets bill would be introduced before parliament on Wednesday to “capitalise on the benefits of Brexit and transform the UK financial services sector”.
Bankers have been calling for speedy reforms to bolster London’s attractiveness as a global centre for finance after Britain’s departure from the European Union.
Amsterdam has already overtaken London as Europe’s top share trading centre, prompting Britain to ease listing rules as it tries to persuade chip designer Arm to have a London listing.
Zahawi said the bill, which includes cutting “excessive” capital buffers at insurers to invest in infrastructure, would unlock “tens of billions of pounds”, a step which pits it against a more cautious Bank of England.
The bill also cracks down on financial scams, ensuring vulnerable people and rural areas have access to cash, and introduces rules for using stablecoins, a type of cryptoasset, for payments.
“Consumers will remain protected, with legislation ensuring that victims of scams can be compensated while also acting to protect access to cash for the millions of people that rely on it,” Zahawi told guests at the City of London’s annual Mansion House dinner in the historic financial district.
Britain’s Payment Systems Regulator will have powers to reimburse victims of so-called authorised push payment fraud, when fraudsters deceive people into sending them money online.
Regulators like the Bank of England and Financial Conduct Authority will be given a secondary objective to promote the global competitiveness of the financial sector, a requirement many regulators across the world already face.
Nevertheless, some lawmakers fear this could herald a return to the type of light-touch regulation which ended with banks being bailed out in the financial crisis. Zahawi said the new objective would be “unambiguously” secondary to maintaining financial stability and protecting consumers.
Part of the bill shifts laws inherited from the EU to the rulebooks of British regulators, making it easier to amend them in future but also giving the watchdogs far more influence at the expense of parliament.
As a counterbalance, the finance ministry had flagged it could grant itself “call-in” powers to tell regulators to review a rule, if it believed that would be in the public interest.
Lawmakers have said this should be done sparingly, and Bank of England Governor Andrew Bailey warned last week the independence of regulators was part of London’s standing as a global financial centre.
Zahawi said call-in powers would not be in the bill, indicating a more cautious approach. “I want time to consider all the arguments before making such an important decision.”
Caroline Wagstaff, chief executive of the London Market Group, which represents the insurance market, said the new financial services bill would boost the sector only if the competitiveness objective for regulators had real teeth.
“The bill absolutely must contain sufficient detail on how the regulators will be held to account on the issue of competitiveness or it will not achieve the regulatory culture change we need, and it will just be words on a page,” Wagstaff said.
Vincent Keaveny, Lord Mayor of the City of London, said a clear commitment is needed on setting out how regulators will focus more on competitiveness, but a “bonfire of regulation” would damage the sector’s international reputation.
A government-sponsored review on Tuesday set out recommendations to speed up how listed companies can tap markets for extra funding, and Zahawi said all of them have been accepted by the government.
A new digitisation taskforce, chaired by former HSBC chair Douglas Flint, will drive modernisation in owning shares by eliminating paper certificates.
The government will also streamline the capital raising process by reforming the Companies Act to accelerate rights issues and the processes around them, Zahawi said.
The first annual “State of the Sector” will be published on Wednesday to affirm the government’s “vision for the sector”.
