Please find below the full transcript of the speech delivered to members by Giles French at today’s AFB Annual Regulatory Conference:
“Good morning and welcome to the Association of Foreign Banks’ Annual Regulatory Conference.
I’m Giles French and it’s my privilege to be the Chief Executive of the AFB.
I’d like to begin by thanking our partner for this year’s conference, Simmons & Simmons. Not only have they provided this fantastic venue, but they have worked closely with us to design today’s agenda and will be making key contributions to the discussion. We greatly value our partnerships with law firms and consultancies. They provide our members with insight and expertise, and enable us to increase the resources available to AFB members – providing you with better value for your membership.
My thanks to Alex Ainley and the whole team here at Simmons & Simmons for their support and hard work.
Let me also thank our sponsors, Whistlebrook, for supporting today’s conference. Their contribution is critical for helping us to deliver this event.
Whatever else 2023 gives us, we are certainly not short of things to discuss today. Occasionally I ask whether there was a time when the regulatory agenda was quiet. If it ever was, no one seems to remember…
The Financial Services and Markets Bill is currently going through Parliament, The Future Regulatory Framework Review, the wider Edinburgh Reforms and the macroeconomic environment in which your businesses are operating, all present challenges and opportunities for our sector. And that’s before the day to day of regulatory compliance and implementation.
This has made for a very busy start to the year for the AFB. In the period from January to Easter, we delivered 30 events attended by over 2,500 employees of AFB member firms. These events covered a wide range of issues from Basel 3.1, model risk management, climate financial risk, the new Consumer Duty and the impact of hybrid working. It is, I hope, a reflection of the value we are providing by bringing together our community to share experiences and best practice. And let me take the opportunity to thank my team and our partners for their hard work delivering this programme.
We have engaged with the government as a whole on issues that have the potential to have a detrimental impact on foreign banks. This included the proposed Foreign Influence Registration Scheme. I’m very pleased that our engagement with the government, alongside that of other organisations, led to a pragmatic outcome. Secondly, we have focused on the recently introduced further Discrepancy Reporting requirements under the Money Laundering regulations, where we have been pushing hard for the government to provide greater clarity and guidance.
Foreign banks are the bedrock on which London as an international financial centre is built. It is your firms that are providing capital, liquidity, risk management, trade finance, expert knowledge of local markets and with the global connections that make the rest of the London ecosystem possible. So it is crucial the insights and experience of AFB members are at the heart of the UK’s regulatory reforms.
On Monday, I attended the Prime Minister’s Business Connect event, where I was delighted he said he wants UK based financial services “to be the most dynamic in the world”.
We should welcome the opportunity we are being given by the Government and the regulatory authorities to review the regulatory architecture in the UK. It’s 15 years since the Global Financial Crisis and the wide-ranging regulatory response, so it is sensible to review what works and what can be improved. The United Kingdom has left the European Union and commenced the huge task of reviewing Retained EU law. I don’t underestimate the scale of this task for both banks and the regulators, but it is right to look at regulation and see if it can be improved and reflects the particular needs of an international financial centre like London.
Let me be clear – the AFB does not support change for its own sake. But we do think we should grasp this opportunity to review our regulatory framework and recommend where it can be improved and made more effective and competitive. We want high quality and balanced regulation, but which enables banks to be globally competitive and operate across borders.
This will be a challenging process, but my commitment to you all is the AFB will work hard with your firms to understand your priorities and make sure the voice of foreign banks is heard.
One issue has come up in every meeting and discussion I’ve had since I started at the AFB – that of regulatory performance. There is wide respect for the expertise and sophistication of the UK regulatory authorities. But some concerns are raised consistently: the speed taken to give authorisations and approvals is too slow and secondly, communications with banks and between the regulators can be opaque and confused. Both of these challenges have a direct cost on banks and the inefficiencies are a cost to the regulator too.
There has been much debate about the new Secondary Competitiveness Objective, with some worried that it is a call for lower standards or deregulation. That’s not how I see it. I think it is a sensible formalisation of good regulatory practice – thorough assessment of the impact of regulation on business and consumers.
I’m also encouraged by the regulators talking about the potential of competitiveness through efficiency and agility – responding quickly to new developments in technology and market practice. That is to be welcomed and supported, but it also needs to be underpinned by improvements in some of the basics, like faster authorisation times and better communications between regulator and regulated. Above all, regulatory approaches should be proportionate to each business. Proportionate to the risk, complexity and the scale of the business in the UK.
The AFB and its members want to play a full part in working constructively with the regulatory authorities to achieve outcomes that work for everyone. I want to record my appreciation of the excellent working relationship the AFB has with the PRA, FCA and HM Treasury. And it’s great we have representatives of the regulatory authorities participating today.
Banking has had its challenges this year. And I want to acknowledge our colleagues at Silicon Valley Bank and Credit Suisse, who have had a very difficult time, as have their customers and clients. I also want to pay tribute to the way the regulatory authorities successfully handled the sale of SVB UK – a good solution and good outcome for the UK tech sector.
But we shouldn’t forget the challenges specific to those businesses. And we should be cautious about the temptation for a blanket regulatory response. Changes to the depositor protection scheme may be necessary, but that needs to be balanced with risk management. We should not move towards a system where individuals and businesses are completely insured against any loss in any circumstance.
Similarly, any push towards greater subsidiarisation, as a reaction to recent events, will mean some existing branches will close and new entrants won’t enter the market. That won’t be good for consumers or businesses in the UK or the wider financial services ecosystem.
Our agenda for today’s conference reflects your priorities.
- We start with Reshaping Onshored EU Legislation. A huge task, but a once in a generation moment to shape the regulatory environment we will work in.
- Sustainable finance remains a top priority. The banks represented in this room are keen supporters of the UK meeting its climate goals, and play a key role in financing the green energy transition.
Central to making London the world’s leading international financial centre for sustainable finance is the adoption of international standards and baselines. Doing so will help ensure interoperability between taxonomies and frameworks. We will hear later in our programme on what the UK’s forthcoming Green Taxonomy should include, and the challenges and benefits to banks that taxonomies create.
- How we embrace and integrate technological developments is core to the success of our sector. The UK has a good story to tell, as the phenomenal growth of the FinTech sector in the last decade demonstrates. I want to recognize the major contribution our regulatory authorities have made to that success – taking a sensible and proportionate approach. Encouraging innovation and working with industry to develop regulation in response. Adapting, not preventing.
But the pace of change only increases with emerging digital currencies, crypto products and web 3.0. Which is why we have a session on AI and how banks and regulators should respond.
- For AFB members from outside the EU, and wishing to establish in the EU or conduct cross-border business, the CRD6 proposals are a key issue. We’ll be taking stock of where the proposals have got to and how to prepare your business.
- The review of the Senior Managers and Certification Regime is a key priority for many AFB members. Ahead of the review being published, the AFB wrote to the Treasury highlighting our initial input.
We recognize and support the benefits of the Senior Managers’ Regime as a framework for governance, accountability, culture and conduct. But we also noted the unique challenge our members face, as many are headquartered in jurisdictions that are less familiar with the Senior Managers’ Regime approach. We have highlighted areas that can be improved to ensure the regime is effective, more efficient, and does not deter further investment in the UK.
We have established an SMCR Review Working Group, and will prepare a formal response to the Call for Evidence and Discussion Paper issued by the regulators.
So, in conclusion, the AFB wants to work with its members and the regulatory authorities to ensure the UK regulatory regime is the best in the world.
We have a major opportunity to ensure the regulatory environment:
- Has high standards – giving business, investors and consumers confidence;
- Is proportionate – regulatory approaches recognize differences in scale, risk and complexity;
- Is effective – information and decision making are efficient and transparent;
- Is competitive – international firms see the UK as the best place to do business.
I want to thank all of our speakers and panelists, all of you for making time to attend today, our sponsor Whistlebrook and partner Simmons and Simmons. Finally, a huge thank you to all of the AFB team. We’re small, but thanks to their dedication and hard work we are able to organise fantastic events like today’s conference.
I hope you enjoy the conference and the opportunity to network with colleagues from other banks. I look forward to meeting many of you today and to working together in the future.”