MPs launch finance watchdog unit to prevent ‘systemic risks’ from post-Brexit rule changes

A cross-party group of MPs will this week launch a task force to scrutinise proposed changes to the UK’s financial service regulatory regime after Brexit.

The treasury committee’s new financial services regulations subsidiary unit will spearhead interrogating tabled amendments to rules governing the City’s banks, brokers and insurers.

Its work will be supported by the creation of a financial services scrutiny unit.

The UK now has the power to shape its financial services regulatory framework after it left the European Union. 

Although these freedoms present an opportunity to allow the Square Mile to maximimse its potential, experts have warned of Britain watering regulations – such as banks’ capital requirements – created to prevent similar mistakes that led to the financial crisis.

Mel Stride, Tory MP and chair of the treasury committee, told City A.M.: “There will be opportunities that Brexit is bringing… though you have to have an eye to the long-term. That really means making sure you don’t just dive in and loosen things up.”

Doing so “could develop perhaps systemic risks,” Stride warned.

The sub-committee’s aim will be “containing the risks associated with [regulatory] changes,” he added.

Solvency II, which requires insurers to hold capital to limit the fallout of failure, has been eyed as a rule the UK can tweak to improve the country’s business environment after Brexit.

London and Brussels have yet to reach an agreement that would allow them to conduct financial services business with each other seemingly – known as an equivalence deal.