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The Actuary The magazine of the Institute & Faculty of Actuaries

UK’s financial sector told not to expect ‘bonfire of red tape’ post-Brexit

Financial regulation in the UK will get stricter after the country leaves the EU whether a Brexit deal is agreed or not, accounting giant KPMG has predicted.

More financial regulation post-Brexit ©Shutterstock

In a report published last week, the company said Brexit leaves “considerable scope for divergence”, despite UK regulators insisting they will not deviate from EU standards.

But calls for a “bonfire of red tape” are likely to be ignored, with Britain’s long history of going above and beyond minimum EU financial regulations, or ‘super-equivalence’, expected to continue.

Moreover, UK firms are already under growing pressure to protect themselves from cyber attacks and technology failures, adding further evidence for a tougher regulatory environment post-Brexit.

Julie Patterson of KPMG's Regulatory Insight Centre pointed to the UK being the only member state in the EU to ring fence its banks, and said this trend would be more common outside the bloc.

“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,” she added.

The report focuses on six drivers for future UK regulation, including financial stability, consumer protection, FinTech, competitiveness, the impact of post-crisis reforms, and the pursuit of social objectives.

Even where the UK remains broadly in line with EU, a “host of tweaks and changes” are expected as European laws are transposed into the Financial Conduct Authority (FCA) and Prudential Regulatory Authority’s (PRA) rulebooks.

While the UK will lose its influence in the EU, KPMG said the country will remain an important player in setting international standards, and may be able to work closer with other financial centres.

“Institutions are therefore likely to have to respond to considerable uncertainty, complexity and cost as the UK regulatory regime adjusts in the new post-Brexit world,” KPMG said.

“This will include re-writing the PRA and FCA rulebooks to reflect the UK outside the EU and following its own path, in some areas, moving ahead of international standards and EU legislation.”

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