The UK will no longer have a direct influence over the EU27, but it can and should improve its own regulations and work with other financial centres and international standard setters to create a more competitive regulatory environment across the world.
In a new IEA report, authors Shanker Singham and Catherine McBride look at what the UK can do in the context of Brexit that would not only improve the UK’s financial service industry, but also improve global financial services and the availability of capital, hedging mechanisms and insurance internationally.
The UK must capitalise on its natural advantages of size, skill, creativity, language, law, time zone and new-found flexibility and responsiveness to retain its dominant market position.
Financial services regulations must:
• Not restrict growth in financial services
• Not encourage regulatory arbitrage
• Not prevent sections of the economy from accessing capital or other financial products
• Help to develop safe but competitive markets
• Facilitate the growth of new and small businesses.
Develop a strong domestic regime in line with global standards and best practices. The UK should reshape its own regime by removing any unnecessary processes and focusing instead on proportionality of the regulatory outcomes in a transparent and cooperative manner.
Pursue WTO disciplines with renewed urgency. The WTO understanding on financial services should be developed with the goal of liberalisation of market access. The WTO Most Favoured Nation (MFN) principle of non-discrimination should be at the core of any agreement on international financial services.
Form an alliance with other major financial markets, such as Switzerland, Hong Kong and Singapore to enable further and deeper integration opportunities. A UK regime of multilateral mutual recognition (MMR) would allow the UK to strengthen its involvement in global regulation formation and dispute resolution.
Form an alliance with UK-linked international financial centres. The UK should make comprehensive bilateral agreements based on mutual recognition with the Crown Dependencies and the Overseas Territories that have established adequate regulatory standards in key financial service sectors such as banking, asset management, insurance and reinsurance.
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