Calls from Guernsey for greater mutual recognition of financial regulatory standards have been endorsed in a new report from an independent thinktank.
The Institute of Economic Affairs (IEA) has made the recommendation as part of a report on improving global financial services regulation and fostering economic growth and innovation after the UK leaves the European Union.
The IEA has also called for the reinstatement of Section 270 of the Financial Services and Markets Act 2000, which offered a marketing route into the UK for non-UCITS funds – this was well used by Guernsey funds before the introduction of the EU’s Alternative Investment Fund Managers Directive.
The report stated: 'The UK should also actively encourage investment funds presently managed from London but domiciled in the EU to move their domicile back to the UK, Crown Dependencies or Overseas Territories.'
Dr Andy Sloan, Acting Director of Strategy at Guernsey Finance, said the key messages of the IEA report resonated with Guernsey Finance’s development strategy, launched earlier this year.
“The IEA support for leveraging mutual recognition across the investment funds regime is something we strongly support, and applies not purely in the Brexit context. We have been regularly making this point ourselves and are raising the issue at IOSCO in Budapest in May,” he said.
“We also endorse the IEA’s support for moves to enhance the Channel Islands’ ability to complement the UK investment management sector post-Brexit by reinstating the mechanism for recognition of funds regimes. We believe this particular move strongly enhances the UK’s competitive position.”
UK alliances
The IEA proposes that the UK form alliances with other major financial centres and make comprehensive bilateral agreements based on mutual recognition with the financial centres of its Crown Dependencies.
It also suggests that the Crown Dependencies’ status of EU equivalence recognition should be copied by the UK as part of the withdrawal from the EU to ‘allow financial services to continue smoothly post-Brexit’. The report said: 'The Crown Dependencies and Overseas Territories are assets to the City of London that can allow the UK to build on its global network.'
Dominic Wheatley, Chief Executive of Guernsey Finance, added: “Guernsey, the Channel Islands, the Crown Dependencies and the Overseas Territories complement, not compete with the City, and can really support UK competitiveness post-2020. IEA’s recognition of these points is a very welcome development and we hope more and more opinion formers and influences take this message on board.”
Guernsey’s funds industry and authorities want to see the UK, as it evolves its own regulations, adopt mutual recognition post-Brexit.
Guernsey Finance has welcomed the report, which supports many of the island’s views on how the UK should approach regulation from March 2019, and how Guernsey can assist the UK to continue to be a leading financial centre outside the EU bloc.