E3G has submitted a response to a consultation opened by HM Treasury on the second phase of the Future Regulatory Framework (FRF) Review, which considers how the regulatory framework for financial services needs to adapt to be fit for the future.
The key aim articulated by HM Treasury is to achieve an agile and coherent approach to financial services regulation in the UK, with appropriate democratic policy input to support a stable, innovative and world leading financial services sector.
The Financial Services and Markets Act 2000 (FSMA), and the model of regulation introduced by that Act, continues to sit at the centre of the UK’s regulatory framework. The government believes that this model, which delegates the setting of regulatory standards to expert, independent regulators that work within an overall policy framework set by government and Parliament, continues to be the most effective way of delivering a stable, fair and prosperous financial services sector.
We welcome the recognition by HMT of the ‘importance of the UK as a financial centre, and the role it plays in the global financial system’. We note also that in the Chancellor’s Financial Services Statement of 2020, he set out an aim for post-Brexit UK to put “the full weight of private sector innovation, expertise and capital behind the critical global effort to tackle climate change and protect the environment.”
In E3G’s consultation response, we propose that an overarching requirement for regulators should be enshrined in the future regulatory framework for financial services which ensures alignment with the UK’s target of net-zero emissions by 2050, and with the goals of the Paris Agreement. If underpinned by a robust governance mechanism to ensure effective operationalisation, this addition offers a clear opportunity to establish the UK as a world leader in green finance.