The British version was launched because the government’s sweeping post-Brexit regulatory revamp of financial services has sparked not only the much-touted “bonfire” of EU red tape, but also a wildfire of new measures to replace those European rules.
This regulatory profusion and confusion threatened to overwhelm the UK financial services industry’s capacity to digest the changes, to adjust and adapt their IT systems and admin processes, and to train staff in compliance.
“The regulators just didn’t care, or give enough thought, to how firms could implement so many changes at once,” one British banker told the AFR.
“The deluge could have worsened the risk of IT failure. Some banks were struggling to cope.”
The industry’s alarm prompted the government to get the sector’s plethora of regulators into a room together three years ago, in what has become a twice-yearly Regulatory Initiatives Forum, to meld their various plans into a common blueprint.
The resulting Regulatory Initiatives Grid is published twice a year. It tries to create clarity and certainty about what is in the regulatory pipeline for the next two years, as well as identifying overlaps and smoothing the rollout. The grid has ended up containing more than 100 policy and regulatory initiatives.
Productivity threat
Australia has not had Brexit to contend with, but the problem is still mirrored Down Under.
The Finance Industry Council of Australia has catalogued dozens of laws, regulations, reviews, inquiries, guidelines, codes, plans and frameworks that are now in the Australian pipeline. Only last week, Treasurer Jim Chalmers added a comprehensive review of the payments system.
This activity cuts across the Parliament, the Treasury, the Attorney-General’s Department, Home Affairs, the Australian Taxation Office, ASIC, Austrac, the ACCC, APRA, the Reserve Bank and an alphabet soup of other departments, bodies and agencies.
“The financial services regulatory landscape is continually changing, with new regulations coming at an accelerated pace, volume and complexity from several regulators, legislators, and policymakers,” Mark Nguyen, policy director at the Customer Owned Banking Association, said earlier this year.
“A modern, whole-of-system approach to regulatory change is needed to ensure the change is proportionate, coordinated, and orderly.”
COBA told a Productivity Commission review last year that regulation at this pace and scale could divert financial firms’ resources away from commercial activity and threaten their productivity.
Britain’s grid has not slowed the pace at which red tape is unspooling. Grant Thornton has said that the latest edition of the grid, published in February, added another 41 policies, reviews, consultations and proposals to an already solid pipeline. That brought the total number of initiatives in the Grid to 144, spread across 50 pages.
But the industry recognises the benefits. Elizabeth Budd, a financial regulation specialist at law firm Pinsent Masons, called it “an essential reference point”.
One banker told the AFR that having the grid allowed banks to prepare better for consultations and to improve their implementation planning.
“It is still an intense regulatory agenda, but there is more transparency and there’s a sense that coordination is increasing,” he said.
British bankers and industry representatives the AFR spoke to were mostly happy with both the grid and forum, though some wanted to see its net widened to other initiatives, such as proposals for voluntary codes of practice.
Some Australian bankers would like to see any local version of the Regulatory Initiatives Forum include a mechanism for consultation with the industry, rather than having only mandarins around the table.
The Aussie model could also designate a lead agency, such as the Treasury, to try to increase the level of coordination, prioritisation and sequencing.
In Britain, the Financial Conduct Authority convenes the forum and publishes the grid, but is not a foreman – more a pen-holder than whip-holder.
Mr Chalmers has not publicly commented on the idea, but in his speech on payments reform last week he emphasised the need for regulatory coordination. “Treasury will be leading work here to improve coordination amongst regulators,” he said of his latest policy project.