LONDON (Reuters) - It could take decades for Britain to determine the shape of financial services industry regulation after Brexit, Nicky Morgan, who chairs parliament’s Treasury Select Committee, said on Wednesday.
Britain and the EU aim to secure a “standstill” or business as usual transition deal starting after Brexit next March, but the country will need new trading terms with the bloc from the end of 2020.
EU officials have said that the EU’s financial market access system known as equivalence, where Brussels grants access to foreign banks and insurers if their home rules converge with the bloc’s, is probably Britain’s best bet.
Morgan told an industry conference on Wednesday the Treasury committee would look at equivalence and post-Brexit financial services in early 2019.
“The story of the next 40 years of this country, or it could be longer, in relation to that future relationship with the EU, is going to be whether we converge, stay the same or whether we choose to diverge and go our own way,” Morgan told the Personal Investment Management & Financial Advice Association annual conference.
Equivalence is patchy compared with current EU market access for Britain’s biggest export sector because it excludes some major financial activities such as commercial lending.
Richard Monks, acting director of strategy at the Financial Conduct Authority, said regulators would be ready if Britain crashed out of the bloc next March with no transition deal.
“On day one, we will be very closely aligned,” Monks told the conference.
The FCA wants Britain to stay closely aligned with the EU, but without Britain having to copy all the bloc’s rules, Monks said.
“We will certainly avoid any race to the bottom or a bonfire of rules,” he said.
But Monks also said Brexit was an opportunity to step back and review Britain’s financial rules, such as those governing retail investments.
Rapid advances in technology will allow the FCA to look at whether retail investment transactions could be reported to regulators on a near real-time basis to cut costs for end investors.
FCA rules could also be embedded into the systems of financial firms to almost eliminate compliance costs, while artificial intelligence could help regulators to spot financial advisers who are likely to mis-sell products, Monks said.
“In the very longer term, this could result in some automated regulatory responses, some form of robo regulators.”
Reporting by Huw Jones. Editing by Jane Merriman