I will give Jeremy Hunt his due – he knows how to ruin a Friday.
There I was, settling in to what I hoped would be a quiet today. Being my birthday today I was hoping celebrations would start a little earlier than standard finishing time. How wrong I was.
This morning, with little warning, our new and enthusiastic Chancellor unleashed a package of over 30 financial reforms which will, if agreed, bring major reform to financial services, particularly regulation.
The changes are branded under the badge of the Edinburgh Reforms. Whether he consulted the Scottish Government over this is perhaps a question for another time.
The Chancellor is on the hunt (sorry) for bright spots in the UK economy, not an easy job these days, and has spotted that financial services has a lot of potential. He wants to unlock that potential.
• Scrapping the Packaged Retail and Insurance-based Investment Products (PRIIPs) regulation – a move that will mean “a new direction for retail disclosure” as the Chancellor calls it
• Giving the PRA and FCA an additional requirement to focus on growth and competitiveness
• Reviewing the Senior Managers & Certification Regime as early as Q1, with a view to reform
There are over 30 reforms in all, ranging from the relatively minor to the pretty profound. Some have called it a bonfire of financial regulations. That might be over-dramatic but there is no doubt the Chancellor is seeking a different direction of travel for financial regulation post-Brexit.
It’s fair to say that since Brexit we have seen little of the so-called Brexit dividend, particularly in the area of financial reform. Mr Hunt wants to change that.
With the economy in the doldrums a little less financial regulation might just spur a bit more growth in financial services, at least that’s what he hopes.
All of this is fine and dandy but there’s a problem because it has not, at least recently, been the same direction of travel as the FCA.
Stung by the Gloster Report and other criticisms from MPs, the FCA has been busy ramping up its regulatory efforts. It’s been more pro-active on scrutinising new entrants to the sector, toughened up its rules and is intervening far more robustly where it spots harm or potential harm.
And, to be fair, it is having some effect. The £108m fine dished out to Santander today by the FCA for money laundering failings is evidence of that.
It will take a week to assess all of the changes Mr Hunt wants to make, and some I suspect will be watered down, but he must get the FCA on board to drive through radical reform.
In recent times the FCA has been focusing on what it is supposed to be doing: regulating. Adding a brief to boost growth in financial services will be a harder ask for the FCA although its recent fintech sandbox initiative and other efforts to be speed up innovation in financial services augur well.
Assuming the reforms are mostly adopted, the net effect may be less but better regulation. Certainly a lot of rules based on EU directives are on the way out. I suspect few will find that a difficult pill to swallow.
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