The UK’s regulatory model must adapt to provide a smarter, more fit for purpose regulatory infrastructure to ensure the future competitiveness of the UK’s financial services industry, according to a new CBI report.
In Smarter Regulation, the business group recommends changes for regulators to provide certainty and stability in a post-Brexit landscape.
New forms of regulatory dialogue are paramount to safeguarding competition, ensuring small and medium-sized enterprises (SMEs) in the sector can compete with larger traditional players, says the CBI.
Simon Moore, CBI financial services director, said: “A strong financial services sector is the lifeblood of the wider economy, enabling the growth and security that business and society rely on.
“Through the revenue and growth opportunities it generates, the sector helps to secure the vital public services we use day in, day out, and acts as a magnet for investment into the UK that helps to underpin our local communities.”
The CBI’s recommends a sector-wide call for evidence on the cumulative impact of regulation and a more formalised collaboration between the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).
Regulators should create new sector engagement initiatives – such as firm open days and sector secondments – to give greater opportunities for them to engage with firms and a thorough re-assessment of the FCA’s criteria to determine fixed and flexible portfolio classification, says the CBI.
They added that flexible portfolio firms should have new and regular opportunities to engage directly with the FCA and to offer feedback.
Mr Moore added: “In order for the sector to support business and to benefit everyone effectively, regulation must be fit for purpose. A cultural change is needed to ensure a more practical approach to regulatory shift, through collaboration and engagement, creating a level playing field between smaller firms – who are disproportionately hit by the regulatory burden – and larger companies competing in the sector.
“Smarter regulation – not less regulation – will provide certainty to financial services firms, allowing them to adapt in a shifting political and economic climate as well as anchoring our competitiveness as a global financial centre.”