The UK government has announced plans to give financial regulators a broader ‘competitiveness’ remission after Brexit. Without clear performance yardsticks, these agencies may risk being ignored and end up having little impact. Brexit has cut off the UK financial sector from the EU, and bankers are now calling for stronger regulators to help keep their industry internationally competitive.
The main purpose of MAR is to strengthen reactions to market abuses and increase the market’s attractiveness to investors. It will also broaden the definition of market abuse to cope with the rapid growth and complexities of technology. In addition, the aim of the new regulation is to create a more transparent marketplace for consumers, with better access to information and a greater understanding of products and processes. It is expected that the new regulation will increase competition in the financial market, as well as increase consumer protection.
The remit should include prudential regulation of all financial institutions. It should also include a single regulator responsible for policing the conduct of business of financial institutions. There should also be a single competition agency to address potential weaknesses of financial services competition and consumer protection. The remit of the single regulator should cover banking systems’ stability and integrity, as well as the stability of the banking system and the integrity of payments.
The revised EU Markets in Financial Instruments Directive (MiFID II) and the Securities Transaction Regulations (SIRs) are the main pieces of European legislation aimed at improving investor protection and enhancing the competitiveness of financial markets across Europe. The MIFID II regulations seek to improve the transparency of financial markets and foster better cross-border cooperation. A UK government response to the crisis is needed to ensure that the financial markets remain healthy.
Financial services are increasingly interconnected, and the lines between these products are blurred. In fact, the fragmented institutional structure leads to different regulation of similar products. This hinders competitive neutrality. A consistent approach to regulation and supervision is more likely to ensure that all financial services remain competitive. And there are a number of other reasons why the UK is pushing for a tighter ‘competitiveness’ remit.
As a result of the uncertainty surrounding the new ‘competitiveness’ remission, UK lawmakers are increasingly looking to the existing framework to strengthen the UK’s financial regulators. The UK’s regulators have yet to clarify the role of the PRA in ensuring that firms follow the regulations aimed at protecting their interests. This may be a good sign for investors as the new ‘competitiveness’ remit could encourage more firms to follow the rules.