THE UK’S financial regulators have been urged to change their approach to ensure the sector works effectively after Brexit.
The Finance Innovation Lab, a charity that supports socially beneficial financial start-ups, published a report on Tuesday that said City regulators must change their approach to ensure the financial sector delivers for the economy and society after the UK leaves the EU.
“The combined forces of Brexit and digital disruption give us a once-in-a-generation opportunity to reorient regulation around the ultimate purpose of finance,” said The Lab’s executive director, Anna Laycock.
“Yet the experience of the innovators we work with is that regulation often fails to appreciate the huge benefits of models that put people and planet first.”
The report said the current ‘purpose-neutral’, financial regulation model is often designed around the large, shareholder-focused firms that dominate the market.
Instead, the report argued that a purpose-driven approach to financial regulation is needed to encourage those building more democratic, responsible and fair ways of doing finance.
Featured case studies in the report included ethical peer-to-peer lending platform Abundance.
“Abundance’s groundbreaking proposition for retail investors – small, long-term investments that support the transition to a more sustainable economy – reflects its organisational purpose: to
help the public invest in things they truly care about,” the report said.
The study said that the UK government should conduct a review, based on a full democratic consultation, to develop an agreed set of purposes for the financial system.
it also recommended that that regulators should add an explicit understanding of social purpose and the value of diversity into their approach to innovation and make better use of regtech.
“If we want to ensure our future financial system delivers for the economy and society, we need new regulatory mandates, rooted in democratic consultation,” said Laycock.
“New metrics that focus on the things that really matter; and a different mindset, embracing fully human-centred regulation.
“There is no such thing as values-free regulation – only values-blind regulation. Now it’s time to put human values back at the heart of the financial system.”
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