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Ashley Alder, the incoming chair of the Financial Conduct Authority (FCA), has said he sees the UK’s post-Brexit financial reforms as a great opportunity but warns against diverging significantly from EU rules.
Speaking before the Treasury Select Committee on Wednesday (December 14), Alder said he sees the FCA’s role in retaining and replacing EU law as a “huge opportunity that should not be squandered”.
Alder told members of the cross-party committee that he believes the Future Regulatory Framework (FRF) review is a big opportunity and it needs to move reasonably fast.
“We have the opportunity to be more agile than prior to Brexit,” Alder said.
On the other hand, he warned that “operating internationally, we need to be quite careful about the degree to which we diverge from international standards …[and] where Europe might be going”.
He pointed out that firms, large firms in particular, typically do not like the complications arising from significantly different, fragmented regulations.
The remarks followed Chancellor Jeremy Hunt’s announcement of a large overhaul of the country’s financial services regulations, called the Edinburgh Reforms, which is aimed at delivering a “smarter and home-grown” regulatory framework for the UK while ousting retained EU law.
During the hearing, Alder was also asked about the Consumer Duty, an overarching principle set out by the FCA in July, which focuses on good consumer outcomes across the supply chain.
According to Alder, the challenge facing firms at the moment is to understand what the actual expectation is, particularly because it is “not positioned as a series of granular rules”.
Alder assured committee members that the FCA will be actively engaging with the industry to help them understand the content of the duty and implement it successfully.
Success, in terms of the new principle, means that “you end up in a situation where there is a good level of understanding of what the duty requires in terms of firm behaviour and acceptance on part of the firms. That will ultimately reduce the size of the rulebook,” Alder told the committee.
Firms have until July to implement the new duty but the FCA chair-elect said he does not rule out the possibility of an extension of the deadline.
“Usually what you need to do is to work with firms in order to ensure they actually are ready and sufficiently confident to be able to go forward with it.
“You don’t do that in a lax way and you don’t defer the timetable without any good reason,” he stressed.
However, he noted that when a deadline is approaching, “you do have to judge sensibly whether or not what you would expect from firms to do is actually going to be delivered. And if it isn’t then you could look at whether or not there needs to be more guidance or there needs to be a reset of the timetable.”
The incoming FCA chair also said he supports more regulation for crypto firms.
“When it comes to crypto-assets, as distinct from the underlying blockchain, our experience with platforms, whether FTX or others, is that they are deliberately evasive,” Alder told the committee, adding that he believes they are “a method by which money laundering happens at size”.
The government appointed Alder in July to lead the FCA for a five-year term starting in February.
In a report published following the hearing, the Treasury Committee said it is “satisfied” that Alder has the necessary professional competence and personal independence for the role.
Alder currently serves as CEO of the Hong Kong Securities and Futures Commission (SFC) and has worked in Hong Kong for more than 20 years.
He will relocate to the UK in January to replace Richard Lloyd who has been interim chair since June, taking over the leadership from Charles Randell OBE.
