By David Biggin and Molly Preleski, PA financial services experts
Brexit creates real uncertainty for the UK’s 90 regulators, and the industries that they regulate. The impact will be far-reaching and regulators will face major challenges in responding to profound changes in policy, the legislative framework and the wider economic context.
The immediate task will be to develop the insights that will allow regulators to understand the options available. It will be important to engage the regulated population in developing these options to help calm industry fears and to ease the concerns generated by the uncertainty.
Most regulators will be starting from a position where their policies and activities reflect a harmonised approach across Europe, with some sectors, such as financial services, having a standardised rulebook. Brexit provides an opportunity to modify and simplify those rulebooks to tailor them to the specific needs of the UK. This work will, however, need to consider how much commonality needs to be retained to avoid creating high costs of entry to UK markets.
The medium term task for regulators will be to set the policy for future rule-making and provide direction to the industry. It is likely that each individual regulator will be affected by policy decisions both within and outside their sector. For example, any central policy decision that determines the rights of EU citizens to work in the UK will have direct implications for those regulators that regulate individuals, and indirect implications for those regulating businesses.
As these policy decisions begin to be put in place, regulators will need to consider how the changes affect their existing plans. This may mean stopping or amending initiatives that are currently underway. The cost of this work should not be underestimated, and will be a particular consideration for regulators who are funded by their industries and where their fees are fixed significantly in advance.
Looking to the longer term, all regulators are likely to be under pressure to demonstrate that they have reduced red tape by removing EU-imposed legislation. This will require careful cross-organisational co-ordination and management, and this should be established before changes are implemented rather than being put in place later.
It is clear that regulators will be operating in a very different environment and will need to rethink both their approach and the number and extent of the resources they will require to address these challenges. They will have to have plans in place to deal with a wide range of scenarios, not least a major market shock where they will need rapid clarity on the immediate response and then any changes to the regulatory regime that may be needed to achieve the desired outcomes. And all this will have to be done with limited resources in a context where the relevant skills will be in high demand.
PA has extensive experience in supporting regulators in managing change. We have worked with nearly 30 regulators in the UK alone over the last five years and can use that experience to help you to establish a Brexit response taskforce, or undertake an impact assessment of Brexit on you as a regulator and the market you supervise. We can also provide the advice and support you need to review your existing change portfolio to determine how it might need to be re-prioritised.
Regulators will be under considerable pressure and scrutiny as Brexit is implemented and they need to start planning for change now. Are you sure you have the right plans, skills and capacity in place?