Unless you have been on Mars for the last two years, you will be aware that the government is planning to hold a referendum after the general election on whether the UK should remain in the EU. That is now in legislation and is quite likely to go ahead even if we see a change of government.
The referendum choice will be between a reformed relationship with the EU and negotiating the county’s departure. The polls indicate that opinion is finely balanced at this stage; however that seems likely to tip towards the No vote next year when immigration from Bulgaria and Romania will receive huge media attention. Most of the financial services industry takes the view that remaining in the EU is valuable, but, unless negotiated reform is credible, a No vote cannot be ruled out. For that reason, the government wants to be able to deliver credible reform; similarly, to a considerable extent, that will also motivate EU countries and institutions to listen to UK concerns as well as consider what reform they want to see.
At this stage, the government is consulting on the ‘balance of competences’ between the EU and UK. What this means is who holds which powers to make and enforce legislation and regulation. The consultation is segmented and the financial services segment is currently open, looking for input by 17th January. This consultation will form a major element of the government’s approach to EU reform in this sector of governance.
The views of some, which we do not share, are that the industry has no wish to see any financial services regulatory activity repatriated. That is certainly not consistent with what we hear from the many firms that we speak to. Is it also true that the industry wants a single European rulebook? One set of rules would obviously be ideal, especially if the rest of Europe chose to comply with ours, but is handing over control of all regulatory policy to the EU an attractive proposition? Is it desirable that ESMA should determine how supervision is done in the UK? Will they be better targeted than a national regulator seeking – imperfectly, to be sure – to address emerging problems? What will happen if the EU becomes even less sympathetic to the financial services industry? Are we ready to hand over the keys permanently? For some, the single standard is all. For many, the content, the cost, the flexibility and the resultant international competiveness are the important features.
Whatever your viewpoint, it would be very good news if firms responded to the government’s consultation. In the consultation document (https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/251514/PU1568_BoC_FSFMC_CfE_proof4.pdf) at p41 is a list of questions, which can be pasted into a new document and annotated with answers to any questions that you consider important. It is then sent to:
balanceofcompetences@hmtreasury.gsi.gov.uk