KPMG expects tougher British financial regime post-Brexit
LONDON (Reuters) – KPMG expects Britain to ignore calls to loosen banking rules after Brexit and said in a report on Wednesday it may even become tougher with measures to protect consumers and defend its financial stability from cyber attacks.
Britain’s regulators are facing pressure in some quarters to cut bankers some slack to help London remain a top global financial sector and major export earner after it leaves the European Union in March 2019.
But the government has said it will need to be able to impose higher than global standards to ensure financial stability and financial services minister Jon Glen told the Financial Times this week that Britain would “do whatever it takes” to maintain its status as a global financial hub.
Consultants KPMG, whose clients include major financial services providers and big British companies, said that Britain’s long-history of “super equivalence”, the practice of going beyond EU and international rules, is likely to continue.
“I see no sign that the UK regulators’ tendency to lead the debate on risk and conduct issues will abate, so regulation may become more demanding, not less,” Julie Patterson of KPMG’s Regulatory Insight Centre said.
Charles Randell, chair of Britain’s Financial Conduct Authority, said on Tuesday that it does not see Brexit as an opportunity to join a race to the bottom.
KPMG said UK regulators were already becoming more hardline on issues like operational resilience at banks.
This week the FCA fined Tesco Bank 16.4 million pounds for failing to head off a “foreseeable” cyber attack, the first such financial penalty.
Britain is also going ahead with rolling out senior manager accountability rules at banks to the wider financial sector next year, even though the EU has no equivalent regulation.
The retail arms of banks will also have to comply with tougher capital rules from next year under a British initiative.
KPMG said banking supervision in Britain will be driven in part by the relationship between the Bank of England and the European Central Bank, given the number of cross-border lenders.
The loss of Britain as a major actor in shaping EU financial rules will change rulemaking in the bloc, and leave Britain’s regulators exposed to a wide range of influences and divergence will mean extra costs for firms, KPMG said.
“Even if the UK is not in future constrained in any way by EU legislation – which seems unlikely – many UK-based firm have operations within the EU and will have to manage potentially divergent requirements, over and above divergence with other parts of the world,” it added.