The uk-eu relationship in financial services

Although the retention in primary legislation of key aspects of EU 
financial services law at the point of the UK’s departure from the 
EU was the right decision for regulatory stability, it now means that 
the UK regulatory framework for financial services is complicated, 
unwieldy, and difficult to amend. Accordingly, the Committee 
welcomes the Government’s Future Regulatory Framework Review.
A competitiveness objective
145. The second consultation on the FRF set out proposals to introduce a new 
statutory objective for the FCA and the PRA requiring the regulators to 
facilitate the long-term growth and international competitiveness of the 
UK economy, including financial services. The consultation proposes 
subordinating this new objective to the primary objectives of soundness, 
stability and resilience of markets and financial systems. This means that 
regulators would have to prioritise their primary objectives in the pursuit of 
this ‘secondary’ competitiveness objective.
146. The regulators themselves welcomed the proposals to position competitiveness 
as a secondary rather than primary objective. For the FCA, Edwin Schooling 
Latter noted that “having regard to sustainable economic growth in the UK 
185 HM Treasury, 
Financial Services Future Regulatory Framework Phase II Consultation, 
CP 305 (October 
2020): 
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/
file/927316/141020_Final_Phase_II_Condoc_For_Publication_for_print.pdf
 [accessed 7 June 2022]

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THE UK-EU RELATIONSHIP IN FINANCIAL SERVICES
economy is not something new to our set of aims”, adding that a secondary 
objective struck “an appropriate balance”. He went on:
“If the competitiveness objective were put on equal footing with 
consumer protection and market integrity, there would be conflicts 
between these … a primary competitiveness objective would pose some 
interesting dilemmas, and there would need to be a lot of thought about 
how we as regulators were expected to balance those”.
186
147. For the PRA, Sam Woods went further, arguing that a “primary objective 
to promote competitiveness is genuinely a bad idea”. In particular, he noted 
how it could present challenges to ensuring that the UK was respected as 
a well-regulated financial services jurisdiction in international regulatory 
fora, with implications for the UK’s influence in leading the development of 
international standards in those settings. He stressed:
“we invest a huge amount up stream in international rule-making—
the Financial Stability Board, the Basel Committee, the International 
Association of Insurance Supervisors. I am certain that, if we had a 
primary objective to promote, say, the international competitiveness of 
UK financial services firms, our authority in those fora would be quite 
heavily reduced.”
187
148. Michael Dobson, then of Schroders plc, articulated the contrary position, 
stating that a competitiveness requirement “should be a primary objective. 
Competitiveness is very definitely not about lower regulatory standards, and I 
see no conflict between looking after the interests of consumers and London 
being a very competitively successful global financial centre”.
188
Lord Hill, 
former European Commissioner for Financial Services, agreed: “It seems to 
me that if it is the wrong objective you should not have it as an objective or 
you might as well make it a primary objective”.
189
149. Separately to a formal objective for competitiveness, other witnesses stressed 
the importance of the UK’s wider regulatory culture in supporting the 
UK’s competitiveness.
190
Innovate Finance, which represents the FinTech 
sector, stressed that “the new objectives will only be successfully applied 
if accompanied by a culture (behaviours and incentives, at all levels of the 
organisation) that supports them”.
191
150. The Economic Secretary confirmed that the Government’s intention is to 
identify competitiveness as a secondary objective for the PRA and the FCA 
and warned that “significant dangers emerge from thinking that primary 
competitiveness has no adverse consequences”.
192
This objective will be 
included in the Financial Services and Markets Bill as set out in the Queen’s 
speech on 10 May 2022.
151.