FCA’s speech on regulating the UK as a global financial centre

On 13 April, the FCA published a speech delivered by Nausicaa Delfas (Executive Director of International and Interim Chief Operating Officer) on regulating the UK as a global financial centre. Extracts of the speech are set out below.

Regulating for UK markets

Post-Brexit, in the wholesale market, the FCA is already taking steps to better tailor it rules and practices. Its newfound position allows the FCA to have a new, more nimble approach to domestic policymaking.  It can focus on using this new flexibility for the global markets we host in the UK, and to better meet consumers’ needs. This, in turn, will make the UK an even more attractive place for global financial services.

In particular, the FCA provides three examples how it can now focus on what works for UK markets, whilst always having an eye to global standards: (a) the Double Volume Cap (DVC) provision in UK MIFIR; (b) the FCA currently designing the mechanics of the forthcoming Long-Term Assets Funds regime together with HMT; and (c) the Investment Firms Prudential Review (IFPR).

Looking to the longer term

The speech also addresses the FCA’s long-term approach to regulating the UK as a global financial centre.  Alongside other regulators, the FCA has been asked by HM Treasury to formally integrate into the way it regulates, the goal of moving to a net zero economy in the UK by 2050, and the FCA intends to consult by mid-2021 on proposals for disclosures aligned with the recommendations of the FSB’s Task Force on Climate-related Financial Disclosures (TCFD) by asset managers, life insurers and FCA-regulated pension providers.  HM Treasury’s is reviewing how to adapt the UK’s regulatory and legislative framework now that the UK has left the EU. A central element of the new framework is the proposed transfer of responsibility to the regulators for maintaining the firm-facing requirements that currently sit on the statute book. This transfer is an essential piece of work. It will provide for an even more agile and coherent regulatory regime for the UK – one that will enable us to keep pace with the changing needs of firms, markets and consumers over time.  The FCA is also considering the recommendations of Lord Hill’s review of the UK Listings Regime, and Ron Kalifa’s review of UK FinTech.

In terms of the FCA’s approach to international firms, Ms Delfas notes that the: (i) standards that the FCA applies to international firms seeking authorisation will be the same as those that it applies in its ongoing supervision of firms; (ii) the FCA has also clarified that it expects firms seeking authorisation to have an active place of business in the UK to enable the FCA to effectively supervise their UK activities; (iii) the FCA will look carefully at a firm whose home jurisdiction’s insolvency rules are not well aligned with the UK’s; (iv) the FCA is closely involved in the negotiations for a mutual recognition agreement with Switzerland, and other bilateral work, and it has also been working closely with US counterparts to ensure UK firms’ access to US markets continues and is strengthened; (v) the FCA will support the government in its ongoing Free Trade Agreement negotiations with the US; (vi) the FCA has provided technical advice to HM Treasury as part of their recent agreement on the UK–EU Memorandum of Understanding – this will be one of the pillars of the UK’s future relationship with the EU; and (vii) the FCA has signed Memoranda of Understanding with regulators across Europe, and with the European Supervisory Authorities.