Economic Secretary to the Treasury Stephen Barclay MP has said the UK will not pursue widespread financial deregulation when it leaves the European Union.
Giving evidence to the EU Financial Affairs Sub-Committee meeting on Tuesday, Barclay said that once an agreement is reached between the UK and EU, the government is looking to achieve a “cut and paste of the status quo” following the withdrawal with regards to current regulatory standards.
But after this withdrawal period, he said he saw “no push from the industry for deregulation” and there is “no appetite” in the City for a regulatory “race to the bottom”.
However, Barclay said that while deregulation was not on the agenda, that “does not mean we cannot be agile, we cannot be evidence-based, cannot build on the expertise of our regulators, [and] cannot be quick to adapt to innovation, with regard to the regulatory approach”.
Barclay added that pursuing “equivalence” of regulatory standards, whereby the UK would adhere to EU rules without having the influence on them it has today, was not an option the government would pursue.
He said: “There are international standards we will look at which will provide the framework for an ambitious deal between the EU and UK.”
Not pursuing equivalence could see the UK push for a free trade agreement on financial services with the EU, similar to those employed by the US and other partners.
In addition, certain regulatory standards, such as Basel II, are based on international standards, as opposed to those formed by the EU and its regulators, which include MiFID II.
“We are not looking to gold plate [current standards], we are looking to regulate in a smart and effective manner,” Barclay added.
He also told the Committee that, despite negotiating for a deal with the EU, the government is also planning for a no-deal scenario, whereby the country and the City could deal with the consequences from “day one” in a process of “onshoring”.
“Firms are looking for sufficient clarity to slow down some of the transition plans they are planning,” he said.
Talks between UK Prime Minister Theresa May and the European Commission were abandoned on Monday, despite early optimism that progress had been made on finally reaching an agreement.
May faces a backlash from the Democratic Unionist Party of Northern Ireland, after the party objected to a proposed agreement on the future of Irish border arrangements.
Once the Prime Minister and her negotiating team are able to achieve progress on the talks, the government will produce a Withdrawal Bill to transition current EU laws and standards into UK law.