UK sets high standards on financial regulation but better global benchmarks needed, study finds

UK business secretary Kemi Badenoch also says regulatory burden is too high during TheCityUK conference speech


The UK is leading the way in transparency and accountabililty in financial regulation but international benchmarks are needed to evaluate the effectiveness of regulators, according to a new study by TheCityUK and Freshfields Bruckhaus Deringer.

The report – ‘Advancing international competitiveness and economic growth: how do financial regulators compare?’ – examined benchmarking practices of financial regulators across 21 jurisdictions around the world. It found that while the UK sets a high standard in its regulatory metrics, it noted the absence of a similar approach globally hampers effective cross-jurisidictional benchmarking.

The study, which was released to coincide with the TheCityUK’s annual conference, said such gaps are a barrier to understanding the full impact of the UK’s regulatory framework on international competitiveness and economic growth.

Miles Celic, chief executive officer of TheCityUK, said: “As the UK navigates its future in an increasingly complex and competitive global landscape, a rigorous, evidence-based discussion on regulatory impact has never been more critical.”

He added that establishing a comparative framework would substantially aid in guiding effective policy development and enhancing the UK’s regulatory environment.

However, UK business secretary Kemi Badenoch, delivering a keynote address at the conference, struck a strongly deregulatory tone. She said: “When I say the burden of regulation has become too high under successive governments, I speak not from theory, but from personal experience,” alluding to her time as a systems analyst in the financial sector.

Badenoch expressed concern about “well-meaning but counterproductive measures that stifle growth, productivity and innovation”.

She added: “Regulation has moved from protection against fraud and systemic failure to everything from diversity to green finance, and this ever-rising tide of micro-management will not necessarily make us or the financial markets stronger.”

Meantime, Chris Bernard, a knowledge lawyer at Freshfields, said: “As we navigate the challenges ahead, it’s important we foster a regulatory environment that not only ensures transparency and accountability but also forges a path guided by evidence, collaboration and a commitment to excellence in regulation.”

Skadden of counsel Azad Ali said: “It makes eminent sense to introduce a system to evaluate regulator performance objectively on a comparative basis. It would certainly help to distinguish the UK regulatory environment as one that aids the industry in functioning efficiently and effectively.”

LIDW co-chair Luke Harrison pointed out London plays an essential role in resolving international disputes, including those based on English and foreign law, which was also “critical to the economic functioning of global society”.

Partners from BCLP commented on whether greater regulatory alignment between the UK and EU might supply greater benefits, albeit politically contentious, alongside such benchmarking.

Partner Matthew Baker said that regulatory alignment would benefit financial services clients by offering cohesive standards, enhancing market access, simplifying compliance processes, reducing costs and improving investor confidence through stability.

Brussels partner Dave Anderson agreed: “There is always room for policy divergences, but these need to be kept to a minimum and closely tailored to a justified difference between markets and cultures.”

Such divergences, he said, cause “unnecessary bureaucratic frictions that harm the ability of UK companies competing in the EU to compete fairly against their EU counterparts”.

Baker said the UK’s ability to align its regulatory framework to its interests nimbly was the most powerful argument for change. “Given the ever-increasing pace of technological change, the UK has an opportunity to be more agile and adapt its regulations quickly,” he said.

“If the UK gets this right, this has the potential to offer a huge competitive advantage. Sadly, [UK] regulators haven’t taken full advantage of this,” he added, noting the EU was leading the way in AI regulation.

For its part, the FCA said it was “providing world-leading standards of accountability and transparency, providing metrics that very few other regulators do” in engaging in such benchmarking. 

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