Finance

FCA Brexit bill hits £10m as watchdog pledges not to undercut EU standards

The UK’s departure from the EU is set to cost its financial regulator some £10m in 2021/22, according to its latest business plan.

The Financial Conduct Authority said on 15 July that while the fees it levies on the industry to deal with the fallout of Brexit have reduced from £15m the previous year, they will still come in at £10m for the coming 12 months.

“We continue to focus the recovery of these costs on the firms most affected by EU withdrawal,” the watchdog said.

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The business plan outlines how the regulator wants to move forward now the UK has officially departed the bloc. Debate has raged in the financial services sector about the future of regulation now the FCA is granted more leeway as an independent regulator, with all eyes turned towards the watchdog after the financial services sector was almost entirely left out of the initial trade deal struck over the new year.

The FCA has poured cold water on a race to the bottom for standards, however, outlining its goal to make sure UK rules “remain at least equivalent” to those on the Continent.

“We cooperate with our international partners so firms can’t avoid regulation by taking advantage of different countries’ rules,” the business plan reads. “To support this, we will complete a systematic review of wholesale regulatory regimes.

“We want to ensure they better suit UK markets and the needs of investors and companies but remain at least equivalent to those in the EU.”

However, the regulator added that it planned to “use the increased flexibility available following the UK’s exit from the EU.”

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“Leaving the EU has given us freedom to tailor our rules better to suit UK markets, while maintaining high, and internationally consistent, standards at least equivalent to those in the EU. We are making our rules more efficient and targeted, and removing unnecessary barriers to entry,” the plan adds.

The sentiments echo recent comments made by the likes of City minister John Glen, and  Treasury’s director general of financial services Katharine Braddick, who led negotiations over a memorandum of understanding with the EU over the City’s post-Brexit future.

While both have been keen to stress efforts to keep London competitive, Braddick told a virtual conference in June that the UK is not going to diverge from EU regulation “for the sake of it”.

PwC’s director of financial services regulation insights, Andrew Strange, said the regulator is clearly committed to the wider agenda of competitiveness in a post-Brexit, post-pandemic world.

“But the accompanying narrative of the regulator is more assertive than firms are used to. Pushing boundaries and testing the limits of its sanctions powers suggests a level of intrusion that may be uncomfortable for some firms, but will be welcomed by good market participants. Modernising its use of data and technology will allow the FCA to be more agile, but will require investment by firms in their own data capabilities,” Strange said.

To contact the author of this story with feedback or news, email Justin Cash

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