What does the Mansion House speech mean for market participants?

The main melody of the Mansion House speech is clear. Growth?is a top priority for the Government. Financial services have an important?role to play, both through the expansion of the City itself, and by financing growth in other sectors.?

The melody is accompanied by an orchestration?of deregulation. The reforms introduced after the Financial Crisis have gone too far, and place too much emphasis on risk.

The remit letters to the regulators are more nuanced (here and here). The regulators are encouraged to continue meeting their primary objectives, but to do so in a way that allows for informed risk-taking. In the FCA letter this is applied to consumers as well as to market participants??

To be fair, the regulators have already heard the Government's music, and are playing some of the?instruments in their toolbox in harmony. The FCA is considering the boundary between retail protection and commercial insurance in the London Market. It has also put out a Call for Input asking for examples of regulations that may now be redundant. The PRA has now completed an overhaul?of Solvency II, with many deregulatory facets.?

BUT. The Chancellor does not provide many specific new examples of deregulation. The Certification Regime part of the SM&CR is to be abolished. Some further thought has gone?into the relationship between the FCA and the FOS, with a view to greater predictability in mass redress - though I recall that this has been tried a few times before. And note that there is no roll-back of the FCA's flagship Consumer Duty. Although promoting growth and more risk-taking, the Government shows no signs of reducing consumer?protection.

So what does this mean for market participants??

• First, that the benefits of deregulation will come slowly. It is important to be patient, and to help the regulators in their task by providing good examples and data, so that the new rules work, and survive the next swing of the regulation pendulum.?
• Secondly, that this will have little impact on supervision and on current regulatory initiatives. The FCA's market studies into protection and premium finance will go ahead as planned. The investigation into motor finance will continue. There will be further spin-off initiatives from the Consumer Duty when poor consumer outcomes emerge.?
• Thirdly, and to finish on a more upbeat note, the Mansion House speech sets a tone that the regulators will not ignore when proposing new initiatives, and provides market participants with a strong counterweight to the regulators' primary objectives.?

Hugh Savill , Senior Adviser