Business

Form F4 alliance to boost City after Brexit, influential wonk argues

The City should forge alliances with other major financial hubs to strengthen and boost its position in the post-Brexit world, a new report by influential trade wonk Shanker Singham argues.

According to Singham and co-author Catherine McBride, both of whom left Legatum to join the Institute of Economic Affairs in March, the UK should use the opportunity to "reshape its own regime" by removing unnecessary processes and focusing on outcomes, before looking to take a leading role in global standards.

Forming an alliance with markets such as Hong Kong, Singapore and Switzerland – similar to the F4 model proposed by the Swiss Bankers Alliance in 2016 – would enable "further and deeper integration opportunities", while a UK regime of multilateral mutual recognition (MMR) "would allow the UK to strengthen its involvement in global regulation formation and dispute resolution", the report argues.

It would also "give the combined bloc a strong negotiating position when discussing regulatory matters with other global financial centres".

Meanwhile UK should also seek bilateral alliances with relevant Crown Dependencies and the Overseas Territories in sectors such as banking, asset management, insurance and reinsurance on a mutual recognition basis.

The report, which argues strongly that Brexit can improve the financial services industry, also suggests setting new regulation and tax regimes for domestic SMEs and fintech companies "to ensure good conditions for new entrants and dynamic high growth firms.

Shanker said: “Now is the time for the UK to promote more competitive regulation in global standard setting organisations and to challenge global rules with anticompetitive effects. Financial regulation is already based on international standards in many key areas.

"Outside the EU, the UK will have the advantage of greater agility in decision making, entering into regulatory recognition arrangements with third countries and implementing appropriate regulations. If these tracks are initiated, the future for UK financial services should be very bright.”

During his time at Legatum Singham was credited with shaping much of the government's Brexit strategy, working particularly closely with environment secretary Michael Gove and foreign secretary Boris Johnson, but one source suggested he had left after having his "wings clipped in a big way".

Outcome-based mutual recognition has been at the heart of the government's demands for a EU-UK financial services deal, on the back of a major blueprint written by the International Regulatory Strategy Group (IRSG) and Hogan Lovells and touted by the City of London Corporation both in Brussels and Westminster.

City of London policy chairman Catherine McGuinness said: "We agree that the Third Country Regime is not suitable for the highly interconnected markets of the UK and EU, and support the notion that industry could engage more with the global standard setters to promote more coherent global standards.

“This report, like the IRSG proposal, recognises the need for a clear plan to avoid unnecessary barriers to trade in financial serivces after Brexit.

“But time is ticking and there are still a number of areas that need clarification. We need progress on the transitional arrangement, more flesh on the bones of the future UK-EU trading arrangement, and clarity on immigration policies."

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CityAM

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