LMG CEO calls for “specifics” from regulators on “pace of change” following passing of FSM Bill
The UK’s landmark Financial Services and Markets Bill has been granted royal assent, marking a significant moment for the London insurance market and its growth prospects and competitiveness.
But speaking to The Insurer TV, London Market Group (LMG) CEO Caroline Wagstaff said the focus must now be on the “pace of change” regarding the implementation of the measures in the bill – especially around the accountability metrics for regulators.
“It’s fantastic the bill has been given royal assent,” she said. “It first came into parliament a year ago and it was a long genesis in the drafting. So it feels like we've arrived at the end of the journey.”
The bill, described as the biggest shake-up of financial services rules in a generation, contains a package of reforms designed to bolster the City of London's role as a global financial centre and which promise to unlock “tens of billions of pounds” of insurance capital for investment.
The legislation will also increase the accountability of the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA), and specifically require the regulators to set out how they are facilitating the UK’s international competitiveness.
It also contains new powers – which HM Treasury said was only made possible due to Brexit – that will set the path for reforms to Solvency II, unlocking around £100bn for investment and cultivating innovation and economic growth.
But there is no doubt that one of the key demands from the London market was around accountability metrics for the regulators.
“I think the sentiment was, ‘we're giving the regulators an enormous amount of new powers, how are they going to be held accountable?’ So the market asked – all the way through this process – for greater accountability around who's marking their homework and let's have some really specific ways of measuring regulatory behaviour and culture,” said Wagstaff.
“I'm delighted to say that the bill has definitely improved and has moved a long way from its original draft towards those asks that we were making,” she added.
From a market perspective, regulation is hugely important, whether it’s about attracting new business or investment.
“On one side, UK regulation is really well-respected. It's one of the reasons people want to come to the UK. But the performance of the regulators, in the last few years, has not been good,” said Wagstaff, citing the length of time it takes to set up a company in comparison to other jurisdictions as an example.
“The regulators now have a very specific responsibility to think about growth and competitiveness. That's a secondary objective for them now, and being held accountable, we think, will make London a much more competitive place to do business.”
Timeline for change
But there's a question hanging over the timeline for change and when the industry will begin to notice a different approach from the PRA and FCA.
“That's a question we keep asking,” Wagstaff told The Insurer TV’s News in Focus programme. “My word is pace. What is the pace of change going to be around this? And someone might say my job is to be a squeaky wheel and I think I'm squeaking quite nicely.
“I get slightly concerned when I hear the PRA saying they're going to start the debate at their conference in September, or the FCA saying ‘Yeah, we're looking at it’.
“This has been coming down the pipe for 18 months. We need to get to some specifics faster,” she asserted.
“The one thing I do believe is that the Treasury will ask for this clause where they can ask for reporting quite quickly. I think they're keen to put down a marker with the regulators quite quickly and we're very supportive of that,” she added.
The metrics still need to be defined. HM Treasury has put out a call for proposals on the performance metrics the UK government should use to hold regulators to account under the bill. While this consultation period is due to close on 4 July, the LMG continues to be very involved in providing HM Treasury with ideas.
“When we think about it, we think about it in a very pragmatic way. So we think about ‘what is the data that the regulators already hold?’ We don't want them to create more work for our members by asking them for data in order to report on themselves,” explained Wagstaff.
“A lot of it is about taking the existing data points on which they are held accountable, and breaking it down into a more granular level. It’s not about giving the Treasury 10,000 good ideas. That's not helpful.
“Let's try and give them 10 good ideas. If they will work, then maybe, we can introduce another 10 in a couple of years’ time,” she concluded.
Watch the 10-minute with LMG CEO Caroline Wagstaff to hear more on:
- The industry’s reaction to the bill being granted royal assent and what it can expect
- Wagstaff’s experience with dealing with the UK government
- Holding the regulators to account
- How the London market will ultimately benefit