Full Brexit impact has yet to impact UK finances, lawmakers say

Full Brexit impact has yet to impact UK finances, lawmakers say

By Huw Jones

LONDON (Reuters) – Britain should avoid hasty reforms to make its financial sector more globally competitive after Brexit split the industry from the European Union, a parliamentary report said on Thursday.

The Treasury has proposed numerous changes to the rules governing capital markets, listings and insurance to exploit independence from EU rules and give the UK an opportunity to innovate. The legislation is due this year.

The outlook for the “resilient” financial sector “appears relatively positive” with far fewer than expected finance jobs migrating to the EU, the House of Lords European Affairs Committee said in its report https://committees.parliament.uk/publications/22728 /documents/167235/default.

But committee chairman Charles Hay said: “You should be a little cautious because there is still a lot to do.”

The report says that while the government would be unwise to bet on “unlikely” future access for UK finance to the EU, it should weigh the benefits of departing from the rules inherited from the bloc and the new costs it entails for businesses would impose.

Irrespective of this, Parliament is tightening the scrutiny of the financial rules after Brexit.

The UK proposes giving regulators a secondary objective, namely to boost the financial sector’s competitiveness, but Hay said the committee asked the government to explain exactly how this would work in practice.

A separate parliamentary report last week declined to back the target, saying it risked weakening standards.

Bankers have urged the government to speed up reform, but Hay said getting the sequencing right is crucial to get the “new place” for a sector that accounts for 10% of total UK tax revenue.

“More important than speed is the ultimate answer, because if you rush and do the wrong thing, you damage something very precious,” Hay said, outlining the report.

Britain’s relations with the EU are strained as Britain’s clearing house access to the bloc is set to end in three years to reduce heavy reliance on London, although the EU granted access on Wednesday https://ec.europa.eu/info/ law/derivative-emir-regulation-eu-no-648-2012/amending-and-supplementary-acts/implementing-and-delegated-acts_en known as equivalence to clearing houses from China and Israel.

A dispute with the EU over Northern Ireland’s trade links with the rest of Britain has put on hold a new forum for UK-EU cooperation on financial regulation, outlined in a memorandum of understanding, given the province’s open border with EU member state Ireland became.

“The MoU would still have value as a mechanism for strategic dialogue,” the report said.

Finance officials say the MoU could help improve ties and open the door to EU equivalence later.

Hay, who has worked in insurance for over two decades, said equivalence for UK reinsurers would benefit London and clients in Europe.

(Reporting by Huw Jones; Editing by Bradley Perrett)

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