U.K. to Empower Regulators to Repeal and Replace EU Rules

(Bloomberg) --

British regulators will be granted greater flexibility to update laws inherited from the European Union, as part of the U.K. government’s push to overhaul the financial industry after Brexit.

The Treasury’s Financial Services Future Regulatory Framework Review proposes giving the Financial Conduct Authority and the Bank of England’s Prudential Regulation Authority the powers to replace EU rules with new ones that are more closely tailored to the U.K. market, according to a statement Tuesday.

“The proposals set out today will facilitate the repealing of the majority of retained EU financial services law that is no longer appropriate for the U.K., and give the U.K. regulators the powers to replace the law with their own rules,” the statement said.

The report underlines the growing split between the U.K.’s financial services industry and the European Union market it used to seamlessly service. Finance was largely excluded from the trade deal with the bloc. 

The Treasury has unleashed a raft of reviews -- from stock exchange listing rules to investment fund regulations -- since Brexit. The latest announcement may widen the fissure with the European Union, which has warned regulatory divergence will make market access less likely.

Similar Rules

In practice, the Treasury said the proposals wouldn’t result in sweeping regulatory changes.

“In many instances, the government would expect the regulators to initially replace the repealed provisions with rules that are similar to those which are currently in place,” the report said. “However, this approach will allow the regulators to ensure that the rules are properly tailored for the U.K. markets, and appropriately reflect their objectives. It will also mean that the rules can be more efficiently updated in the future.”

The plans would also require the FCA and the PRA to consider both the implications for growth and international competitiveness of their regulations, as well as their existing objectives of maintaining market integrity, consumer protection and a sound financial system. The two regulators should also ensure their actions are consistent with the government’s drive toward net zero greenhouse gas emissions by 2050, according to the report.

It also proposes giving the Bank of England wider rulemaking powers over both central counterparties and central securities depositories. 

The Treasury said the changes will be a “significant undertaking” that will be delivered through “ an extensive program of secondary legislation, which is likely to take several years.”

The consultation will close on Feb. 9.

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