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Donald Trump’s election as US president brings “clear dangers” of a global race to the bottom on financial regulation, the chair of the UK Financial Conduct Authority told MPs.
“You can see the apparent direction of travel in the US,” said Ashley Alder at a hearing of parliament’s Treasury select committee on Tuesday, warning against the UK pursuing “any sort of deregulation agenda”.
“The UK has seen the advantages that can arise from influencing and embedding international standards . . . and that is not something we should be abandoning,” he said.
President-elect Trump has promised to slash red tape and nominated industry-friendly names to run key financial regulators, prompting Wall Street executives to cheer the prospect of rules being reversed in many areas from crypto assets to climate change.
The FCA is under pressure to do more to support UK economic growth and competitiveness. Chancellor Rachel Reeves said last month that rules drawn up after the 2008 financial crisis had “gone too far” and were stifling risk-taking, urging the FCA to do more to support growth.
Alder said the watchdog had already enacted a number of reforms to make the UK more competitive, such as easing rules for stock exchange listings in London, and it planned to do more, with proposals to encourage more advice on pensions due this week.
But he warned against trying to compete with the US or other countries in cutting regulation. “There are clear dangers in indulging in any sort of race to the bottom in any sort of deregulatory agenda, for obvious reasons that go right back to the financial crisis 15 years ago,” he said.
The FCA published its response to the chancellor’s official “remit letter” on Tuesday, in which it warned there could be “obstacles” to global co-operation in areas such as sustainable finance and crypto assets.
The watchdog said the UK may need to “make progress with a smaller group of like-minded jurisdictions” on some issues, in an implicit warning about how Trump’s deregulatory agenda could fragment the global consensus on financial rulemaking.
Trump last week nominated cryptocurrency advocate Paul Atkins to chair the US Securities and Exchange Commission, drawing cheers from across the finance industry as it hopes for a more favourable regulatory climate than under the SEC’s outgoing boss Gary Gensler.
The UK is preparing legislation to strengthen FCA oversight of crypto markets. But the watchdog’s letter warned the chancellor that “other jurisdictions might pursue a different approach or not seek to regulate these products at all”.
Trump is expected to intensify a backlash against climate-friendly rules. The FCA said this could leave it with a tough choice, as global standards on sustainable finance “may create opportunities for both the UK financial services sector and long-term investment but it could also mean we impose requirements on firms not implemented in other major jurisdictions”.
The FCA added that “we may see an increase in protectionist impulses when it comes to cross-border data sharing”.
Alder, who was previously head of Hong Kong’s Securities and Futures Commission, said the UK could respond to divergence with the US by pursuing regulatory agreements with the EU, as well as countries such as Singapore, Hong Kong and Japan.
But he said his experience of dealing with US counterparts during the last Trump administration from 2016 to 2020 had shown “participation around global issues and global risks is quite encouraging in practice”.