The Chancellor’s Mansion House speech and accompanying document – ‘A new chapter for financial services’ – set out the Government’s vision for an open, green, and technologically advanced financial services sector that is globally competitive and acts in the interests of communities and citizens, creating jobs, supporting businesses, and powering growth across all of the UK.
In December 2020, HM Treasury published a call for evidence on the UK’s overseas framework, and the regimes within it, to ensure that they continue to work effectively and support the UK’s consumers, firms, and markets. The Government issued a response to that Call for Evidence and set out next steps for this review in July 2021.
In doing so, the Government stated that it remains committed to maintaining a safe, open, and globally integrated financial system, enabling international financial services business by reducing barriers and frictions, where safe and practicable. Our overseas framework, including regimes such as the Overseas Persons Exclusion, has been a fundamental part of the success of the UK as a global financial centre.
In responding to the Call for Evidence, the Government said that there were four principal areas that it wanted to look at in more detail:
- The overseas persons exclusion (OPE);
- Investment services equivalence under Title VIII of the Markets in Financial Instruments Regulation (MiFIR);
- Recognised overseas investment exchanges (ROIEs);
- The Financial Promotion Order (FPO) in general, and specifically in relation to the distribution of certain overseas long-term insurance products in the UK.
The Government’s response to the Call for Evidence noted that there are still information gaps about how firms use the OPE, how they might do so in future, and what the implications are for UK financial markets, including their resilience and safety. We have been working closely with the Financial Conduct Authority, the Bank of England and the Prudential Regulation Authority to gather further information in preparation for an upcoming consultation on the UK’s regime for overseas firms and activities. This involves considering whether the access for overseas firms remains appropriate following the UK’s exit from the EU and given technological developments that are changing how firms can serve their clients.
The Government is committed to maintaining an overseas access regime that ensures firms based in the UK can connect with counterparties and customers globally, while continuing to ensure that those with significant UK business lines continue to maintain the appropriate operations, regulatory permissions and authorisations in the UK; and are able to be supervised effectively. We want to ensure the UK remains a world-class environment to do business and maintain the ability of UK and global firms to benefit from the UK’s deep wholesale markets, which has been key to the UK’s leading global role in financial services.
The Government has noted the feedback from respondents to the Call for Evidence that the current overseas framework is complicated, difficult to navigate and that the implications of any changes to the framework should be carefully considered. As such, the Government intends to assess how the current framework is being used and consider the implications of any reforms in careful detail before bringing forward proposals on potential changes to the UK’s regime for overseas firms and activities. The consultation will also consider changes to the UK’s overseas framework which will make it more coherent and easier to navigate, reinforcing the Government’s commitment to maintaining an open financial centre.
In considering how best to move forward, the Government wants to be fully informed about the views of stakeholders. We would emphasise the importance of further evidence being provided on how these regimes are used, and how market participants navigate them, so we can ensure they continue to support the principles that guide our approach to cross-border financial services.
This statement has also been made in the House of Lords