With the onslaught of Government and regulatory announcements happening every day, the City needs to know who to watch and when to take notice. Here is a breakdown of the two key new decision-makers who are taking up their roles in October, their approaches and priorities for new policies and regulatory changes that will impact financial services.
Nikhil Rathi, FCA Chief Executive Officer
The FCA sought to make a big statement on the regulator’s priorities post Brexit, given Rathi’s background in international financial services. Rathi has been the CEO of the London Stock Exchange’s UK division since 2015 and was well known to officials in the Treasury, where he served as a director of its financial services division for five years from 2009.
The appointment is a powerful signal that the FCA is likely to become more internationally focused in the post-Brexit world, and play a bigger role in protecting the City as a pre-eminent international financial centre, given the potential loss of business post Brexit.
Rathi officially takes over the role of CEO on 1 October. He will be keen to prove he is more than a Treasury mandarin. During his appointment process he said he had several transformation priorities:
- A strong data and technology strategy, underpinned by strong analytics. This has particular importance for supervisors responsible for preventing consumer harms.
- Cultural change within the organisation to ensure that strategic decision making is paramount between supervision, enforcement, competition, and policy domains.
- Focusing on diversity, both in terms of a diverse range of opinion and representation. In addition to the Women in Finance Charter and BAME representation, there is an opportunity with remote working to utilise talent from across regions in the UK.
- Preventing consumer harms specifically, given the split between large and small firms under the FCA’s supervision
Mairead McGuinness, European Commissioner for Financial Stability, Financial Services and the Capital Markets Union
McGuinness is a political choice for European Commission President Ursula von der Leyen. She is a household name in Ireland and an experienced four-term MEP from the European People’s Party but one with little directly related policy experience.
Given von der Leyen’s trademark focus on stability and continuity and McGuinness’ lack of financial services experience, the Commission’s priorities in the sector are not likely to change following her appointment, not least because a significant amount of drafting has already been completed for several of the initiatives that are expected in a proposal-heavy second half of 2020.
McGuinness’ priorities cover all initiatives central to the EU’s financial services regulatory framework including the review of MiFID II, the Benchmarks Regulation, and the Alternative Investment Fund Managers Directive (AIFMD). The Commission is also looking at a set of financial services proposals this autumn:
- Sustainable Finance – The European Commission has just completed its first wave of green finance initiatives and is now preparing for the publication of its renewed sustainable finance strategy. This is key to the prominent role of sustainable finance in delivering the EU Green Deal.
- Digital Finance – With the Covid-19 pandemic we have seen an increase in online payments and cashless transactions, which strengthens the EU’s view that digital finance rules are needed to protect customers and allow fintech businesses to innovate and grow. To that end, a new Strategy on Digital Finance will be published at the end of October, together with a Strategy on an integrated EU payments market and, for the first time, rules on crypto assets.
- Capital Markets Union – In addition to the points above, the biggest project will be the implementation of the Capital Markets Union action plan which is expected to be published 28 October.
The Capital Markets Union is directly linked to the EU’s plans surrounding Brexit, – although the exact implications remain unclear. Since the vote in 2016, the EU has made no secret of its ambition to relocate the continent’s financial services capital to the mainland, but the sheer complexity of what happens in London presents a daunting challenge. The CMU proposal is the latest programme aimed at boosting confidence in its own financial markets, driven also in part by the pandemic and the vulnerabilities it exposed in the bloc’s lack of autonomy.
While the EU will invest time and effort in the endeavour, it is still easier said than done. The EU has tried for decades to stitch a number of smaller financial centres spread across Europe into a world-class system with limited success. For now, the UK’s financial services firms will continue to play a significant role in the future of Europe’s.
All the new EU commissioners face hearings in Parliament in September with the vote in Strasbourg to confirm the new Commission as whole due on 22-24 October.
These two new figures, and the spectre of Brexit, will be critical in different ways for the UK’s financial services sector. As these new decision-makers settle into their roles in October, we should carefully watch their announcements, briefings and if there any potential shifting in their focuses which can impact regulatory and policy changes across the sector. If there is one thing we have all learnt in 2020, it is that even the best-laid plans may need to be adapted.