Omar Ali is the Regional Managing Partner for Emeia Financial Services at EY
2021 has not been an easy year, but we have seen some landmark developments in financial services in Europe, including record profits, record high M&A levels, the first significant wave of European fintech unicorns and industry-wide commitments to make a real difference in climate change about.
M&A in the European financial services market has hit record levels this year, and this momentum is expected to continue into 2022. For many companies, it will be the best way to accelerate growth following the pandemic.
We are likely to see more of these agreements in 2022 as fintech companies increasingly look for ways to access deeper pools of capital, especially in public markets.
The focus on financial services could not have been clearer at COP26. Three things will drive real progress: the creation of the Glasgow Financial Alliance for Net Zero, which brings together 450 companies in the financial sector representing $ 130tn of AUM to accelerate the decarbonization of the economy; the Minister of Finance announces that all UK financial services companies and listed companies will have to publish net-zero transition plans; and the IFRS Foundation establishes the International Sustainability Standards Board, which will develop a global standard for sustainability reporting.
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Sustainable finance will also continue its path through 2022, and we expect it to dominate corporate and regulatory agendas.
Finally, the speed with which technology is transforming financial services is expected to continue at a rapid pace, through servicing and product development, the increasing use of cryptocurrencies, ongoing outsourcing to the cloud and the continuing rise of artificial intelligence as a business facilitator. We can even see a large global economy launch a state-subsidized digital currency.
While the EU has extended the temporary equivalence of UK-based clearing beyond June 2022, this comes with significant costs, risks and complexity. Persistent uncertainty means that the risk of fragmented markets remains high, which would be inefficient and costly for all participants and could harm global competitiveness in both the UK and the EU.
To maintain its competitive position, the UK will increasingly look beyond European borders to build new relationships and explore new opportunities. Regulatory divergence is an option, but any drastic attempt to redefine the UK framework could reduce market access. It will require decisive action to build and further streamline processes that make the UK an easier place to do business in and out – especially around authorizations – and we expect actions such as setting defined regulatory objectives related to competitiveness to emerge more fully out.
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With a focus on Brexit, it’s easy to forget that the UK and the EU remain each other’s closest trading partners. In 2022, we need strong communication and political work to ensure that we lay a strong foundation for a new era of European financial services.
This article is part of a series of UN interviews on the prospects for London’s financial services sector and beyond in 2022. Capture people like EY’s Chris Woolard, London Mayor Sadiq Khan, city leaders on the prospects for inflation and investment bankers on the deal’s fateful boom here.