Financial services regulation: Focus on stability and net zero, government urges

Citizens and campaigners have urged the government to rethink its pursuit of “competitive” financial regulation in favor of rules focused on building a stable financial system that protects the environment and consumers.

Results of a survey of more than 2,000 people this morning by the charity Finance Innovation Lab reveal that nine out of 10 people think international competitiveness should “not be a top priority” in financial services regulation post-Brexit.

The polling exercise comes as 37 charities and public interest groups have come together to call on the government to stage the ‘once in a generation’ overhaul of financial services regulation that is currently underway to push the situation forward economic, environmental and social of the United Kingdom. goals. As such, they called on the government to reduce its focus on boosting international competitiveness and give regulators new obligations to compel them to take action to help meet the UK’s emissions reduction targets. and to meet its commitments under the Paris Agreement.

The government is currently proposing to introduce a new objective for financial regulators which would give them a mandate to promote the international competitiveness of the UK financial industry, with consultation on this until February 9.

The proposal met significant opposition, with critics noting the plans risked eroding the independence and ability of regulators to act in the public interest and could result in watered down financial standards.

Competitiveness was dropped from the targets of UK financial regulators in 2012 following the global financial crisis, amid fears it had led to light regulation that would have allowed financial firms to take risks forever taller. A range of organisations, including the International Monetary Fund, Oxfam and the Tax Justice Network, have warned that focusing on competitiveness is risky because when a financial sector gets too big it can start sucking up resources of the real economy and reduce productivity. , creates instability and generates inequalities.

Greenpeace, the Tax Justice Network and Tax Justice UK, RSPB, ShareAction, Positive Money, Make My Money Matter and Uplift are among organizations that have announced they are “strongly opposed” to the introduction of statutory targets for regulators to promote the international competitiveness of the industry.

The groups instead called for regulators to be given the goal of aligning the financial system and its regulatory framework with the Paris Agreement’s 1.5°C temperature target, while taking into account the importance of nature conservation.

They warned that the current plans could undermine the UK’s climate targets and green finance ambitions, while undermining the independence of regulators.

“Just a decade ago, the UK Parliament acknowledged that regulators’ focus on competitiveness had contributed to the global financial crisis of 2007/08 – the cataclysmic event that cost the UK $10 billion. global economy and has seen millions of people lose their savings, homes and jobs.” “In the words of Andrew Bailey of the Bank of England in 2019, when he was CEO of the Financial Conduct Authority, the regulator ‘was required to take into account the competitiveness of the UK, and it does not is well over, for anyone”. The Chancellor’s laudable goal of making the UK the world’s first net zero financial center would be undermined if the risk of instability deters the private investment urgently needed to fund a climate transition. correct.

The group also called on the government to give regulators new functions to promote financial inclusion and take steps to increase public accountability and transparency in financial services by creating a new register of lobbyists and introducing a new committee. Joint Financial Services Committee in Parliament responsible for reviewing legislation and regulation.

Jamie Audsley, head of future nature at RSPB, said the current proposals missed a “golden opportunity” to cement the UK’s position as a global leader in green finance.

“Giving regulators a statutory target to consider our climate targets would be a world first and help cement the victories of the Glasgow COP,” he said. “The review is a great opportunity to make the UK the world’s first net zero financial center and align finance with the government’s climate goals, delivering on the Chancellor’s vision of ‘rewiring the financial system for Net Zero. “.”

The Treasury was considering a request for comment at the time of going to press.

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