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Our very low expectations on what would be achieved by way of an agreement with the EU for financial services at the end of the transition period on 31st December 2020 were, if anything, too optimistic. The "deal" for financial services was set out in a half page document on Christmas Day. You can find the agreement with our brief analysis written on Boxing Day here. As you might surmise, writing it did not unduly impinge on our bank holiday.
The most solid commitment in the half page was that a Memorandum of Understanding would be agreed by March. Whilst what purports to be a leaked text has circulated, nothing has yet been offcially published.
Whatever is in the MoU when it eventually sees the light of day will fall very far short of what we had with access to the financial services single market and passporting. From 2nd August, the Directive and Regulation on the cross-border distribution of funds (CBDF) comes into effect, making the position less clear for non EU managers. We will provide updates in our newsletter as local implementation of the CBDF becomes clearer.
And so to the Brexit upside and the TIGRR. This report was published in May and can be found here. It looks at ways to refresh the UK’s approach to regulation now that we have left the EU, and to seek out opportunities to take advantage of our new-found regulatory freedom, to support innovation and growth. In particular it seeks to make recommendations for a bold new UK regulatory framework based on core principles of UK law. It is broad-ranging, including the thrilling prospect of bringing back Imperial weights and measures.
So what does it have lined up for the "bonfire of regulation" for financial services?
The first priority they have flagged is a change to the charge cap for defined contribution pension schemes and the introduction of a long term asset fund.
This is slightly odd for two reasons:
a) As regular readers of our newsletter wil be aware, it is already well underway;
b) It is UK legislation so we could always have done it anyway.
The other notable changes proposed are amend the UK Solvency II rules for insurers to reduce the reduce risk margins by 75% which can apparently be achieved without increasing risk and to encourage the Local Government Pension Scheme members to invest in their own area, which was something that George Osborne proposed in 2014 and then dropped, although the broader proposals to pool the LGPS were taken forward.
Overall, we are not going to pay much attention to the TIGRR until it turns into some more definite proposals. We also note the Governernment is currently recruiting a head of the new unit to take over from Iain Duncan Smith in finding post-Brexit opportunities.
In the meantime, we will continue to wait for the financial services MoU.