The International Chamber of Commerce (ICC) has urged two of the UK’s main financial regulators, the FCA and the PRA, to introduce a smarter and more agile regulatory framework to help small businesses.
The Financial Times said it has seen a letter from the ICC’s UK Secretary General Chris Southworth to FCA Chief Executive Nikhil Rathi, in which the former says there is an “urgent need for reforms to regulations governing the raising of trade finance that is key to underwriting global transactions.”
The letter criticizes an “antiquated” regulatory framework in the UK, which it says means the country cannot benefit from digitizing and modernizing operations around exports. “These gains are negated by an antiquated regulatory framework that remains bureaucratic and inefficient, with laborious compliance checks and overburdensome capital requirements,” Southworth was quoted as saying.
But both the FCA and the PRA have dismissed the criticism, insisting that they have already taken steps to reduce the regulatory burden on banks and smaller businesses.
According to the ICC, the UK could potentially reduce a £22 billion ($29.99 billion) trade finance gap if it can rework the Basel 3.1 regulation around bank capital requirements, streamline its “know your customer” rules and apply a lighter regulatory touch in general.
The Basel 3.1 rules have an implementation deadline of 1 January 2027 and the ICC boss criticised UK regulators for not moving fast enough to achieve goals in time.
New trade strategy
The ICC letter comes just two weeks after the UK published its first Trade Strategy since leaving the EU, which aims to “protect and boost British business.” The government has said: “The strategy will make the UK the most connected nation in the world while protecting vital industries from global threats and backing businesses to thrive.”
And one way of achieving that goal would be to work “on quicker deals that firms can benefit from sooner, with a strong focus on services and high growth sectors,” according to a government press release.
The FCA has told the FT its already working with the government to streamline regulation, reduce compliance burden and achieve its secondary goal of economic growth.
“Our letter to the prime minister set out one potential way of reducing anti-money-laundering costs by relaxing know-your-customer checks on small transactions. We are testing this idea with the government,” the regulator was quoted saying.
The PRA has also said it is working on watering down capital requirements for banks, which will help trade finance and lending to SMEs.
Tina McKenzie, Policy Chair of the Federation of Small Businesses, said last month: “Small firms have been bogged down by unnecessary rules and costs for far too long.”
She added there was a need for “more money and new funding programmes for SMEs wanting to trade internationally, as well as more bespoke support for the smallest firms, who do not qualify for one-to-one help.”
In October last year, Prime Minister Keir Starmer told an International Investment Summit in London his government will get rid of any regulatory bureaucracy that hinders economic growth.
