Treasury and banking watchdogs will need extra cash after Brexit, report warns
The Government will need to pump extra cash into the Treasury and key banking watchdogs to ensure Britain's financial system can cope with added regulatory burdens after Brexit, an influential City body has warned.
With Britain widely expected to scrap external oversight from the EU, the International Regulatory Strategy Group (IRSG) said the Financial Conduct Authority (FCA), the Bank of England's Prudential Regulation Authority (PRA) and the Treasury will be in desperate need of more funding and staff.
"Additional resources will be needed not only to take on a greater role in policy development but also to assume responsibilities currently with EU institutions," the IRSG said in a new report.
"Although many of these functions will not be very burdensome, some will require significant investment; for example, the supervision of credit ratings agencies and the making of equivalence decisions."
The report, which was put together in collaboration with law firm Linklaters, said UK authorities will need to bolster their international presence if they hope to influence global regulatory standards that will "only increase in importance over the coming years".
It also warned that "significantly more resources would be needed" if Britain and the bloc fail to agree to mutual market access, as they will have to regulate and supervise EU firms in the UK.
The findings raise concerns over the ultimate financial burden of taking on regulatory oversight.
The IRSG is also calling on the Government to urgently review the responsibilities being granted to UK institutions after its EU divorce.
"While the UK regulatory system is likely to be broadly fit for purpose after Brexit, it would benefit from targeted reform when the legislative agenda permits," the report said.
"Given the significant transfer of powers and responsibilities to UK regulators and the loss of legislative and supervisory scrutiny at the EU level, mechanisms to ensure accountability, coherence and flexibility will need to be enhanced."
The IRSG - which is co-sponsored by lobby group TheCityUK and the City of London Corporation - said new parliamentary committees dealing with financial regulation should be established in order to increase scrutiny of the likes of the Bank's PRA as well as the FCA, and said the remit and composition of their internal panels should also be reviewed.
Consultation processes could also be improved, while financial services legislation stands to be "simplified and consolidated" in an effort to increase transparency and cut down on overlapping regulations.
Mark Hoban, a former Treasury minister and chairman of the IRSG, said: "We believe the system we have is already very good, but it will need to be updated to meet the challenges of Brexit.
"It must continue to be independent, but also subject to appropriate checks and balances to keep it accountable and responsive.
"In order to maintain the UK's well-respected and globally leading regulatory regime, it must have sufficient flexibility to anticipate and respond to market developments and innovations."