Treasury 'will have to expand post-Brexit to handle new rules'
The Government will need to pump extra cash into the Treasury and key banking watchdogs to ensure Britain's financial system can cope with added regulatory burdens after Brexit, an influential City body has warned.
With Britain widely expected to scrap external oversight from the EU, the International Regulatory Strategy Group (IRSG) said the Financial Conduct Authority (FCA), the Bank of England's Prudential Regulation Authority (PRA) and the Treasury will be in desperate need of more funding and staff.
"Additional resources will be needed not only to take on a greater role in policy development but also to assume responsibilities currently with EU institutions," the IRSG said in a new report.
"Although many of these functions will not be very burdensome, some will require significant investment; for example, the supervision of credit ratings agencies and the making of equivalence decisions."
The report, which was put together in collaboration with law firm Linklaters, said UK authorities will need to bolster their international presence if they hope to influence global regulatory standards that will "only increase in importance over the coming years".
It also warned that "significantly more resources would be needed" if the UK and the bloc fail to agree to mutual market access, as they will have to regulate and supervise EU firms in the UK.
The findings raise concerns over the ultimate financial burden of taking on regulatory oversight.
The IRSG is also calling on the Government to urgently review the responsibilities being granted to UK institutions after its EU divorce.
"While the UK regulatory system is likely to be broadly fit for purpose after Brexit, it would benefit from targeted reform when the legislative agenda permits," the report said.
"Given the significant transfer of powers and responsibilities to UK regulators and the loss of legislative and supervisory scrutiny at the EU level, mechanisms to ensure accountability, coherence and flexibility will need to be enhanced."
Meanwhile, the IRSG also said new parliamentary committees dealing with financial regulation should be established in order to increase scrutiny of the likes of the Bank of England's PRA as well as the FCA.