HM Treasury launched a consultation on Phase II of the Future Regulatory Framework Review, with the comment period ending on January 19, 2021. The second phase of the Review considers how the regulatory framework for financial services needs to adapt to be fit for the future, particularly to reflect the new position of UK outside the EU. The consultation proposes an overall approach to the regulation of financial services, built on the existing Financial Services and Markets Act 2000 (FSMA) model, which the government believes should form the foundation of the future regulatory framework. However, at this stage, it does not present a full package of proposals, which will be part of the second stage of Phase II.
The Future Regulatory Framework Review was established to determine how the overall approach to regulation of financial services needs to adapt to the new position of UK outside the EU and to ensure the regulatory framework is fit for the future. After focusing on the specific issue of coordination between the UK regulatory authorities in Phase I of the review, the government is now moving to Phase II, which will examine the broader regulatory framework for regulation of financial services in the UK. The government is conducting this phase of the review in two stages. This first consultation sets out an overall blueprint for financial services regulation, focusing on the split of responsibilities between Parliament, the government, and the financial services regulators. In doing so, it highlights the importance of ensuring appropriate and effective arrangements for accountability, scrutiny, and public engagement with the policy-making process, particularly in relation to the financial services regulators of UK. The government will carefully consider the responses received and use these to inform a second consultation in 2021, which will set out a final package of proposals and how they will be delivered.
The consultation seeks views on proposals and options for adapting the financial services regulatory framework following Brexit. This consultation focuses on how the FSMA model of regulation can be built on to provide a regulatory framework that makes the most of opportunities provided by Brexit and which will underpin a stable, innovative, and internationally competitive UK financial services sector far into the future. The consultation proposes a blueprint for the future regulatory framework which builds on the strengths of the FSMA model. This blueprint, which is referred to in this consultation as the post-EU framework proposal, has the following key features:
- It provides for a clear allocation of responsibilities between Parliament, HM Treasury, and the financial services regulators.
- Government and Parliament will be responsible for setting the policy framework for financial services regulation. This will include new policy framework legislation for specific areas of regulated activity that will give the government and Parliament the opportunity to set out the key public policy issues that must be considered when designing and implementing regulatory standards.
- PRA and FCA will be responsible for designing and implementing the regulatory standards that apply to financial services firms and markets using their existing rule-making powers in FSMA.
- PRA and FCA will be subject to enhanced transparency requirements obliging them to explain how they have had regard to the public policy issues set out by Parliament in activity-specific policy framework legislation.
- The cooperation and coordination arrangements that exist between HM Treasury and the financial services regulators will include more systematic consultation between these institutions at an early stage in the policymaking process.
Comment Due Date: January 19, 2021
Keywords: Europe, UK, Banking, Insurance, Securities, Brexit, Future Regulatory Framework, FSMA, PRA, FCA, HM Treasury
Previous ArticleFSB Sets Out Effective Practices for Cyber Incident Recovery
The Hong Kong Monetary Authority (HKMA) revised the Supervisory Policy Manual module CG-5 that sets out guidelines on a sound remuneration system for authorized institutions.
The European Banking Authority (EBA) published the final guidelines on the monitoring of the threshold and other procedural aspects on the establishment of intermediate parent undertakings in European Union (EU), as laid down in the Capital Requirements Directive (CRD).
In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.
The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.
The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.
The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.
The European Securities and Markets Authority (ESMA) published recommendations from the Working Group on Euro Risk-Free Rates (RFR) on the switch to risk-free rates in the interdealer market.
The European Central Bank (ECB) published a paper as well as an article in the July Macroprudential Bulletin, both of which offer insights on the assessment of the impact of Basel III finalization package on the euro area.
The International Swaps and Derivatives Association (ISDA) published a paper that explores the impact of the Fundamental Review of the Trading Book (FRTB) on the trading of carbon certificates.
The Prudential Regulation Authority (PRA) published the remuneration policy self-assessment templates and tables on strengthening accountability.