The International Monetary Fund (IMF) has warned the United Kingdom that deregulation of the country’s financial system presents issues over the role of the Bank of England (BoE) in competitiveness.
Last month, Prime Minister Boris Johnson announced the U.K.’s Brexit Freedoms’ legislation will be coming as the second anniversary of the U.K.’s withdrawal from the European Union approaches, according to a press release. He said the government initiative would include cuts of 1 billion pounds ($1.3 billion) in red tape designed to ease regulatory burdens.
In a 94-page assessment of the U.K.’s financial stability, the IMF said it expects that its strength will be further enhanced, but stresses over policies to improve the competitiveness of the U.K. financial system have surfaced.
Brexit’s market fragmentation is expected as costs for financial firms rise and could trim business investment in Britain, according to the IMF report.
While the U.K. should maintain its commitment to the highest standards of finance, the IMF wrote in the report “Similarly … financial stability should not be compromised for the objectives of competitiveness.”
The geo-political repositioning by Johnson’s government has presented a puzzle. Without depending on the EU for regulations, the U.K. is on a path to create its own.
Read more: UK’s Platform Regulations Need More Scrutiny
In an interview with PYMNTS, Philip Schlesinger, a professor from the University of Glasgow, said at the same time, it’s an almost impossible task given that no state can regulate colossal platforms on its own, and it’s clear that regulatory collaboration is needed.
“The term neo-regulation tries to capture the way regulators are recomposing their activities and trying to align themselves with the challenges of regulation,” he said. “It’s a kind of informal formalization of regulatory power, and that’s an important step.”
A second aspect is the U.K.’s effort to distance and distinguish regulation from the EU and make more bilateral connections with other regulatory regimes.
