London’s financial industry is bracing for a new set of rules for London’s investment banking sector that would effectively force the closure of many businesses, forcing a large number of customers to resort to using a single banking platform.
The Financial Conduct Authority has said it will not be able to fully implement the proposals it is proposing to place on the table, but the agency said it is “extremely concerned” by the proposals.
Ahead of the meeting, FCA chairman, Michael Woodley, said the new rules would be “far-reaching and would create a massive new set-up burden” for many businesses.
“We are deeply concerned by the level of uncertainty surrounding this proposal, which is based on a fundamentally flawed premise,” he said.
He said the proposals were likely to be considered at a future meeting of the Financial Conduct Agency.
Woodley said that the new proposals were “not only wrong on many fronts but they also raise serious questions about the future of the banking sector in London”.
“They will put the lives of thousands of people at risk,” he added.
Under the proposals, FCOs will be required to establish a single “finance customer” or “financial intermediary” for the UK financial services sector, and all customers must sign up to an agreement to use the service.
It’s a fundamental threat to our ability to compete in the global economy and to our way of life, and to protect our financial institutions from the risk of regulatory failure. “
[It] puts the lives and livelihoods of millions of people in the UK at risk.
It’s a fundamental threat to our ability to compete in the global economy and to our way of life, and to protect our financial institutions from the risk of regulatory failure.
What this proposal does is create a very high barrier to entry to the UK.
Its not just the risk that the FCO is going to have to deal with.
Its also the prospect of having to manage and defend this risk, which has a huge impact on the way people use financial services.”
In an interview with the Financial Times, FCTA chairman, Woodley said the changes were “out of date” and the proposal had “nothing to do with the industry” and was instead “based on a fundamental misunderstanding of the nature of the market”.
He added that FCO was now considering whether to propose a new regulatory framework that will “protect the integrity and stability of the UK’s financial services market and its institutions”.
In the meantime, Woodson said the FCTAs proposed rules would apply to new investment banking products introduced in April.
In its statement, the FCC said the proposed changes were not the result of the previous consultation process but were a result of an “internal FCA process”.
The FCA said it was “unable to predict the full impact” of the proposed change in the financial services industry.
If the proposals are approved, they would mean that firms that were already operating in the industry would be required “to apply to the FFC for permission to continue operating in their current capacity”, the FCEA said.
The proposed changes would require companies to agree to a “burden sharing agreement” to set up a single customer and to “consult with customers and stakeholders on the development of a common product and structure”.
However, the new proposal is not set out how such an agreement would be reached, nor how it would be enforced.
“The new proposal does not set up any obligations for the new customer to pay a fee for services that are provided to them by the FEC,” it said.
“It would be up to the customer to decide whether they would opt in to such a fee.
Fees imposed under the proposals would not be transferable and would be payable at the time of signing up to services provided by the company.”
The proposal is likely to attract the support of other major financial services players, including Barclays, which owns HSBC, Lloyds Banking Group, Credit Suisse and Rabobank.
“We welcome this new consultation as it allows us to make a clear assessment of the impact of the proposals on the UK banking sector, with the FOC taking a neutral stance on them,” said a Barclays spokesperson.
Barclays has already said it intends to fight the proposals in court.
However Barclays’ chief executive, Sir Philip Hampton, said that Barclays was “confident that it will prevail in court” and that it was likely to appeal.
Last month, Barclays said it would challenge the proposed measures in the courts if they passed.
But it has now changed its tune and said it could not support the proposed new regulations if they were approved by the courts.
Banks’ Chief Financial Officer, Stephen Green, said he believed that “the majority of banks would be happy to participate