The major change in the Bill states that UK financial regulators will have to consider the ongoing competitiveness of the sector when rulemaking. This will sit as a ‘secondary’ objective after consumer and market protection.
Peter Allen, Partner and Co-Head of Financial Services at RSM UK, describes the change as a “compromise between industry lobbying [which wanted regulators forced to promote the competitiveness of the UK financial services industry] and the regulators, who publicly resisted any new objective”.
While the pro-competition rule, and another pledging to reform Solvency II, with an expectation that capital adequacy rules will be relaxed to potentially unleash cash for investment by insurers, were the big headliners, a few lines in the Bill could lead to more fundamental change.
This is the ‘rule review’ power. It will enable the government to direct the regulators to review their rules where it is in the public interest, as well as a power to require regulators to make rules.
It has been suggested that these powers will expose the UK regulators to a greater degree of political interference than is currently the case.
Detail on these new powers is currently scant. However, lawyers at Freshfields Bruckhaus Deringer believe it is likely these powers will be among the more controversial aspects of the Bill as it passes through the legislative process.
You can read more from the Financial Services Faculty here: Understanding the Financial Services and Markets Bill
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