Post-Brexit trade deals may blunt U.K. financial regulators

Britain’s financial regulators could have their supervisory powers blunted by trade agreements with other countries, such as the U.S., under guidelines proposed for a post-Brexit regulatory framework.

Among the proposed changes published by the Treasury on Tuesday is a call for the Financial Conduct Authority and the Bank of England’s Prudential Regulation Authority to “assess whether the exercise of their powers to set rules and approaches on supervision is in compliance with the U.K.’s obligations under our trade agreements.”

Chancellor of the Exchequer Rishi Sunak has committed to an “agile and flexible” regime as the U.K. moves to its own standards now that the country has left the European Union. Sam Woods, chief executive officer of the PRA, has said the BOE has “absolutely no intention of weakening prudential regulation in the U.K.” as part of any changes.

However, trade arrangements threaten to complicate the U.K. regime and could water down standards. 

“There is now a case for ensuring that the regulators assess compliance with relevant trade agreements as a matter of course when making rules,” the report said. Regulators will have to consult the Treasury “on the general anticipated impact on these areas” of any planned rule changes.

“Striking international agreements does not constitute a weakening of high regulatory standards,” a spokesman for the Treasury said. “The regulators are already subject to obligations under the U.K.’s trade agreements, and these proposals provide continuity by requiring them to consider international obligations when making rules under the proposed future system.”

The government has made no secret of its desire to strike a trade deal with the U.S. which would demand access for financial services as a pre-requisite of any pact. U.S. financial regulations are less stringent than the European Union ones that the U.K. currently uses.