While some sections of the Eurosceptics are pushing to loosen lending rules, KPMG expects that Britain’s FCA and the Prudential Regulation Authority at the Bank of England will in fact tighten and enhance rules governing finance.
In a report released on Wednesday, KPMG, stated it expects Britain to ignore calls to loosen financial regulations post Brexit. In fact it expects regulations are likely to become even more stringent and will include measures to protect consumers and defend Britain’s financial stability from cyber attacks.
British regulations are under pressure from certain quarters to cut bankers some slack so as to help London maintain its position as a top financial sector; the finance industry is the country’s top earner and it faces growing uncertainty once Britain leaves the European Union in March 2019.
Te British government has stated, it will impose standards that are higher than global standards to ensure financial stability. According to Jon Glen, Britain’s financial services minister, Britain will “do whatever it takes” to maintain its status as a global financial hub. This is what Glen told the Financial Times this week.
This is in line with KPMG’s thinking. Britain has a long-history of “super equivalence” and its standards go beyond EU and international rules; this is likely to continue.
“I see no sign that the UK regulators’ tendency to lead the debate on risk and conduct issues will abate, so regulation may become more demanding, not less,” said Julie Patterson of KPMG’s Regulatory Insight Centre.
UK regulators were already becoming more hardline on issues like operational resilience at banks, said KPMG.
Earlier this week, the FCA fined Tesco Bank 16.4 million pounds for failing to head off a “foreseeable” cyber attack – the first such financial penalty.
Further, Britain is also rolling out senior manager accountability rules at banks to the wider financial sector in 2019; the EU has no equivalent regulation.
KPMG expects, banking supervision in Britain will be driven in part by the relationship between the Bank of England and the European Central Bank, given the number of cross-border lenders.
“Even if the UK is not in future constrained in any way by EU legislation – which seems unlikely – many UK-based firm have operations within the EU and will have to manage potentially divergent requirements, over and above divergence with other parts of the world,” said KPMG.