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FINANCIAL SERVICESPRIORITIES FOR THESECTION 2
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UK’S G7 PRESIDENCYSECTION 3

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June 2021

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FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCYSECTION 2

INTRODUCTIONSECTION 2

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In January 2021, the UK took over the presidency of the G7
from the USA at a pivotal time – when the incoming U.S.
administration is re-engaging with multilateral bodies.
The UK government has the opportunity of demonstrating
leadership on the global stage post-Brexit, working
collaboratively with G7 and G20 partners and addressing
the economic challenges posed by the pandemic. With the UK
co-hosting COP26 with Italy, the G7 presidency provides
a unique opportunity to achieve a high-level consensus across anumber of key agendas.

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Regulatory fragmentation remains a significant challenge.
The UK should work towards ensuring continued regulatory
coherence and convergence in order to avoid hampering
the recovery by locking capital behind national borders.
Furthermore, there are advantages of sharing good practice andideas on recapitalisation, addressing corporate indebtedness,
to aid pandemic recovery. It will be important to ensure that
pandemic recovery is a green, sustainable and equitable
recovery, and one that is consumer-centric and takes
into account consumer financial resilience.

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SECTIONto1account for the effects of the pandemic, the industry
calls for the same global regulatory co-operation that was
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3 in the aftermath of the 2008 crisis and is advocating
witnessed

Pandemic recovery, climate and the digital agenda all featurestrongly among the UK’s priorities for its G7 presidency. To that
end, this report seeks to contribute the perspective of the UK
financial and related professional services (FRPS) sector to the
UK’s agenda for the G7. The International Regulatory Strategy
Group (IRSG) identified key FRPS priority areas for the G7 in
January. This paper sets out detailed thinking on how the UK canachieve significant progress in the above areas.

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As global standard setters recalibrate their work programmes

for clear guidance to address the emerging challenges posed by
the pandemic.

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FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

SUMMARY OF RECOMMENDATIONS
In summary, the IRSG believes the UK’s G7 presidency can tackle the most pressing
challenges for the global economy by focussing on the following four areas:

1. GLOBAL REGULATORY COHERENCE FOR PANDEMIC RECOVERY“Pandemic recovery,
climate and the digital
agenda all featurestrongly among the
UK’s priorities for
its G7 presidency.”

2. LEADERSHIP ON SUSTAINABLE FINANCE AHEAD OF COP26
3. DIGITAL POLICY CONTINUITY, INCLUDING ON DIGITAL TAXATIONSECTION 1

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N 24. SECTIONALIGNMENT WITH G20 GLOBAL POLICY PRIORITIES

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FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

1.

GLOBAL REGULATORY COHERENCE FOR PANDEMICRECOVERY, RECAPITALISATION AND RESOLUTION

4

FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

Unprecedented economic shock

Emerging issues from the pandemic

Last year, the global economy underwent the most significant
economic shock since the 2008 financial crisis. In the UK, theeffects of the COVID-19 virus itself, the imposition of public healthrestrictions and voluntary social distancing to contain its spread,meant that among the G7 countries, the UK economy experienced
the largest contraction in volume GDP over the first six months of
2020, with a 8.6% shortfall in volume GDP as of the end of Quarter3 2020 relative to its pre-COVID level.1

The unprecedented economic shock from the pandemic has once
again underlined the importance of global cooperation to protect
against the effects of this crisis and its emerging challenges. For
instance, reputational issues for the financial services sector remain
as online financial scams are on the rise, as is online gambling. UK
FRPS trade associations, such as UK Finance have shared how the
pandemic has been exploited by crime. In the UK, £207.8 million
was lost to Authorised Push Payment (APP) fraud, in line with thesame period last year, and the trade body is calling for legislation
to ensure greater consumer protection.2 Importantly, the issue of
online financial scams has underlined the need for local cooperation
between regulators due to the role of platform businesses (e.g. social
media). In the UK, the Digital Regulation Forum, which the Financial
Conduct Authority formally joined in April, is a welcome move.
Attention could also be turned towards looking at obligations on
those hosting online financial services advertisements to ensure thatthese are being placed by genuine regulated entities.

As economies around the world adopted lockdown measures tocombat the health crisis, an immediate global liquidity crisis was
avoided owing to global markets functioning well and governments
rallying to provide support to businesses and providing temporary
debt service relief to developing countries.
Stressed liquidity conditions did not translate into a banking
crisis owing to the measures put in place following the 2008 financial
crisis – specifically, the too-big-to-fail systemic reforms establishedafter the G20 London summit in April 2009, implementing
institutional mechanisms to ensure sufficient liquidity in times ofglobal financial stress. That said, a holistic assessment of how thefinancial system performed during this stress event is necessary, andlater this year the FSB will report on lessons learned and whether
further reforms are needed to reinforce its resilience.

1	https://www.ons.gov.uk/economy/grossdomesticproductgdp/articles/internationalcomparisonsofgdpduringthecoronaviruscovid19pandemic/2021-02-01

In addition, there are questions of whether, in light of the pandemic,enhancements could be made both to the too big to fail (TBTF)
reforms for systematically important banks (SIBs) as well as to theregulatory framework for how the non-bank sector has performedin light of the pandemic, which will be a focus for the FSB’s work
this year. According to analysis by the FSB, the TBTF reforms could
be developed further in the areas of total loss absorbing capacity
implementation and transparency of resolution funding mechanisms;

52

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FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

it also found that while the post-GFC growth in market share ofnon-bank financial institutions may have enhanced the stability of
the financial system through the diversification of funding sources,
there are vulnerabilities, such as in short-term credit markets, which
require to be addressed. These are areas of focus for the FSB’s work
this year3.
Much has been said about a V-shaped recovery from the pandemic
slump and avoiding a W-shaped double-dip-recession. In orderto achieve this, it will be imperative to address emerging industry
macroeconomic and fiscal concerns over:• how governments unwind quantitative easing measures,• h ow they deal with the currently historically all-time
low interest rate environment,

It will be important to strike the right balance on the role ofprivate vs sovereign creditors for emerging market debt relief
post-pandemic. Currently, private creditors are not incentivised toparticipate and a viable incentive mechanism should be put in place
to drive private creditor participation. The UK G7 presidency has arole to play, driving global consensus with stakeholders, including
through work with Multilateral Development Banks (MDBs).
As world economies shift gear towards pandemic recovery, it
will be important for the UK and its G7 partners to work together
to address the above issues and thus, support global recovery.
Joint coordinated action and global regulatory coherence is needed
to minimise potential future fragmentation and protectionist policies
in the wake of the pandemic. It underlines the importance,
now more than ever, of promoting regulatory coherence. It is
important that the pandemic recovery is a sustainable, equitable
and citizen-centric recovery.

• debt sustainability, the role of private vs sovereign creditors,• h ow to avoid liquidity issues turning into solvency issues
as lockdown measures continue for an extended periodof time and ultimately • h ow to build back better while keeping in mind the climate
agenda and beyond to account for business model viability
and wind-down support measures needed.

3https://www.fsb.org/work-of-the-fsb/financial-innovation-and-structural-change/non-bank-financialintermediation/

“Joint coordinated action andglobal regulatory coherence isneeded to minimise potential
future fragmentation andprotectionist policies in thewake of the pandemic.”
6

FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

Recovery and recapitalisation
In relation to COVID economic recovery, there are a number of areas
where the UK can show global leadership via its G7 presidency. Global
health is certainly an immediate priority and the financial services
industry pledges its support of the vaccine rollout globally. Beyond
that, leadership is required on the recapitalisation of the corporate
sector, policies to mitigate the effect of zombie indebtedness, andnew ways to attract growth equity capital to SMEs through regulatory
reform. To that end, we welcome the OECD report4 on Fostering
Economic Resilience in a World of Open and Integrated Markets,
which offers a broad range of recommendations to the G7 on building
economic resilience, serving as a roadmap to the G7 presidency’s
Economic Resilience Panel5.
TheCityUK has done extensive work on Covid-19 recapitalisation andthe role of the FRPS industry in post-COVID recovery.6 Subsequently,
the Group of Thirty7 has set out its recommendations for therecapitalisation of the corporate sector, focusing on longevity ofreforms and consultation with the private sector. Recently, a reportby the Association for Financial Markets in Europe (AFME) and
PwC warned that an equity shortfall of up to €600bn threatens
Europe’s economic recovery (potentially leading to widespread andimminent business defaults and job losses as COVID-19 state support
measures are gradually reduced), despite the significant public
support measures and private capital made available across Europe
to support economies during the pandemic.8

4https://www.oecd.org/newsroom/oecd-reports-to-g7-on-need-to-strengthen-economic-resilience-against-crises.
htm
5
https://www.g7uk.org/economic-resilience-panel/
6 	https://www.thecityuk.com/home/covid-19-update/recapitalisation/
7 	https://group30.org/images/uploads/publications/G30_Reviving_and_Restructuring_the_Corporate_
Sector_Post_Covid.pdf
8 	https://www.afme.eu/news/press-releases/AFME-Equity-and-hybrid-markets-hold-solution-to-EuropeanCOVID-19-corporate-recapitalisation

The report revealed that 10% of all European companies have cash
reserves to only last six months. AFME has called on the European
Commission and Member States to introduce measures to bolster
Europe’s equity and hybrid markets and expand funding avenues forbusinesses, further enabling Europe’s economic recovery.9 The G7should review existing thought leadership on recapitalisation as it
considers its approach.
The IRSG has underlined the need for coordination on a global levelin order to support pandemic recovery10. The UK government should
leverage its G7 presidency to build a consensus on measures toboost the recovery of the corporate sector among leaders across theG7 and beyond. In doing so, we urge the government to build on
the work currently being led by the Bank of England in its review of
productive finance.
The concerns about the recapitalisation of a highly leveraged
corporate sector are compounded by the risks of creating zombie
firms. Zombie indebtedness has been compounded by the
pandemic. The UK can demonstrate leadership by developing
proactive policy solutions to help reduce corporate leverage postpandemic. To that end, we note the UK government’s work on
recapitalisation with HM Treasury, the Bank of England and the
Financial Conduct Authority’s set up of a Working Group to facilitate
investment in productive finance for recapitalisation.11

9 	Measures proposed include: the development of a common, standardised COVID-19 recapitalisation
instrument, deployed in conjunction with a corporate education programme; the scale up of existing
recapitalisation schemes such as the European Guarantee Fund and replicate existing initiatives at member
state level; the development of public-private forums to develop new schemes and run corporate education
programmes; the development of an EU-wide public-private investment fund; as well as the introduction of
investor incentives (i.e. time-limited capital gains tax exemptions and temporary adjustments to regulatory
capital and solvency requirements).
10 https://www.irsg.co.uk/resources-and-commentary/irsg-report-global-solutions-to-global-problemspromoting-regulatory-coherence-in-financial-services-for-pandemic-recovery/
11 https://www.bankofengland.co.uk/financial-stability/working-group-on-productive-finance7

FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

Policymakers can deploy a range of strategies to proactively avoid
a future insolvency crisis and find ways to manage this debt, byencouraging sustainable investment in productive new enterprises,
and incentivising the creation of new, viable jobs, while consideringloans for strategically important enterprises, and promoting
reskilling incentives in case of redundancy.
To avoid the above risks undermining the recovery, government
support across the G7 through targeted grants, loans, guarantees
and investments could play a key role in delivering a recovery
which is fair, efficient and fast. While equity markets are not easily
comparable across G7 markets, we recommend developing a menu
of options through globally co-ordinated, expert analysis, potentially
led by the Financial Stability Board (FSB), which could help
jurisdictions choose solutions that meet their particular needs.
To that end, we welcome the FSB membership’s adopted measures
to ensure that the financial system is able to respond to thepandemic, based on the FSB’s five principles on lending andcredit support; funding and liquidity support; market functioning;
operational continuity and authority business continuity measures,
which the UK and the G20 community has signed up to12.

G7 RECOMMENDATIONS:• G
 7 to aid the set-up of public-private forums to develop new
schemes and run corporate education programmes, building
on existing thought leadership on recapitalisation.
• G 7 to ask the Financial Stability Board to convene a forumof its membership to share best practice and draw up a planon securing corporate recapitalisation at scale, based on
productive finance principles, including a menu of options foraddressing zombie debt risks arising from the pandemic.

“Policymakers can deploy
a range of strategies toproactively avoid a future
insolvency crisis and findways to manage this debt,
by encouraging sustainable
investment in productive
new enterprises.”
8

12https://www.fsb.org/work-of-the-fsb/covid-19-maintaining-financial-stability/covid-19-policy-responses/

FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

Protectionism and regulatory fragmentation
There has been an emerging trend in policy and regulatory
protectionism in response to the pandemic, particularly in global
trade. In September 2020, ICAEW noted that as governments feelthe pressure to implement protectionist policies and measures –including tariffs, quotas and subsidies – as a way of ‘saving’ domestic
jobs and enterprises, an acceleration towards protectionist trade
policies will follow.13 In October 2020 the World Trade Organization
forecast a 9.2% decline in the volume of world merchandise tradefor 2020, followed by a 7.2% rise in 2021.14
In fact, in its policy paper ‘Global Britain, local jobs’, the Department
for International Trade concurred that protectionist sentiment has
been on the rise for over a decade, but has intensified in recent years– fuelled by the COVID crisis, sharing that since the G20 Summit in2018, G20 governments have imposed subsidies four times more
often than between 2014 and 2017 and that the pandemic has
further prompted a surge in import and export restrictions.15

13 	
https://www.icaew.com/insights/viewpoints-on-the-news/2020/sep-2020/trade-will-covid19-drivefurther-protectionism
14 https://www.wto.org/english/news_e/pres20_e/pr862_e.htm
15 	
https://www.gov.uk/government/publications/board-of-trade-report-global-britain-local-jobs/global-britainlocal-jobs-html-version

In November 2020, the United Nations Conference on Trade andDevelopment (UNCTAD) considered the impact of the pandemicon trade and development and noted the shift towards regionalism
and increased protectionism.16 Mukhisa Kituyi, Secretary-General of
UNCTAD noted in October 2020 that inward looking policies andtrade protectionism will also increase imbalances in the recovery
process, adding to the risk that the pandemic will exacerbate
existing inequalities, creating the real possibility that the least
developed countries (LDCs) will fall further behind.
Kituyi urged that in order to avoid a surge in protectionist measures,
governments must monitor how responses to COVID-19 affecttrading partners. They must ensure that any such measures aretargeted and temporary, and duly address the interests of affected
countries, particularly LDCs. Ultimately, keeping exports todeveloping countries flowing without unwarranted impediments willbe crucial to a broad-based recovery.17

16 	https://unctad.org/system/files/official-document/osg2020d1_en.pdf
17 	https://unctad.org/news/new-take-trade9

FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

Restricting investments is another measure that can impede global
recovery. A number of countries issued plans to apply additional
scrutiny and screening to certain investments during the pandemic.
Measures were put in place in Canada with the Investment Canada
Act, the European Union with new guidelines on health and medical
research investments.18 Differing countries’ investment screening
processes vary in severity: the UK government has recently proposeda welcome relaxation of the acquisition thresholds in the UK National
Security and Investment Bill, currently before Parliament.
As governments turn inward and regulators become more risk averse,
this has led to policy and regulatory localisation, such as requiring
localised capital and liquidity fragmentation (for instance, as in thecase of CCPs in the EU). Disruption and subsequent localisation of
supply chains and supplier choices and immigration restrictions, hasbeen a significant trend during the pandemic, affecting banking,asset management and related professional services alike. Challenges
have also been posed for global firms’ operations by extraterritorial
provisions in relation to intra-group outsourcing.

services sector ’. The report argues that the financial services sector iswitnessing increasingly protectionist behaviours across the world in
the form of data localisation. Due to various concerns, governments
have sought to protect the data of their citizens by implementing
restrictions on its transfer. This is leading to changes in the approachto data protection and other related regulation, with businesses nolonger able to share data across borders on the same basis as they
have done in the past.19
The report includes recommendations on how alternative
measures could potentially better address the concerns of bothnational governments and regulators that have resulted in data
localisation, which we argue should be adopted by the G7. The
recommendations are as follows: a) a principles-based approachto data protection; b) regulatory oversight concerns should be
addressed by rules on access rather than location; c) operational
resilience should focus on the quality of the outsourcing solution,
not its location; d) increased co-operation at an international level;
and e) use of international trade agreements to remove barriers.

Data localisation policies have had a particularly significant effectwith restrictions or practices affecting cross-border data flows, digitalproducts, Internet-enabled services and other restrictive technology
requirements being pursued by several countries. In December 2020,
the International Regulatory Strategy Group (IRSG), in collaboration
with DAC Beachcroft LLP, launched a report on ‘How the trend
towards data localisation is impacting the financial

To address these challenges, with the G7 presidency, the UK shouldtake action to uphold the global trading system and help strengthen
the role of the World Trade Organisation, where the WTO Joint
Statement Initiative (JSI) on E-Commerce can be useful. One of its
immediate priorities should be addressing data localisation, guided
by the recommendations set out in the IRSG report.

18 	
https://www.brinknews.com/covid-19-protectionism-the-worst-may-be-yet-to-come-nationalism-trade-supplychains/19 	https://www.irsg.co.uk/resources-and-commentary/irsg-report-how-the-trend-towards-data-localisation-isimpacting-the-financial-services-sector/

10FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

Regulatory fragmentation challenges
The UNCTAD conference in November 2020 highlighted theincreasing fragmentation of international economic policymaking,with a shift away from multilateralism and towards bilateralism andregionalism.20 The UK’s G7 presidency should strive to resolve theexisting and emerging global regulatory fragmentation challenges.
And in doing so, it should build on the legacy of past presidencies.
For instance, the Japanese G20 presidency in 2019, recognised the
detrimental effect of global regulatory fragmentation and advocatedfor the inclusion of fragmentation in the FSB’s agenda. This work
should now be continued.
For instance, the extended Basel III timeline to 1 January 2023
is welcome, but there needs to be global consensus on how to
prepare businesses giving sufficient transition time once final rules
are established. National regulators have used up much of that timein producing implementing rules, leaving industry with timelinesthat are difficult to meet. In addition, in the run up to the deadline
in 2023, many pandemic regulatory responses will still be ongoing,
so it will be important to align timeframes as the financial services
system seeks to support the economy through recovery.

Regulators should consider the implications for an international
level playing field should the timelines not be resolved on aninternationally consistent basis. There is a need to ensure alignment,
if not in content, then in timing. Furthermore, it is also importantto address expected pandemic corporate credit losses and how
inconsistencies in recording these may lead to a lack of comparabilityof financial performance of the banking system, undermining BaselIII. Overall, the pandemic regulatory response has been positive, andwe welcome the FSB identifying core principles to drive consistency
in national policy making, but some exceptions remain, notably, on
accounting, dividends and leverage ratio.
To tackle fragmentation, we would welcome the UK’s leadershipin calling on the Financial Stability Board for a thorough stock-takeof bank branch and subsidiary requirements so that the financial
stability and productivity costs of fragmentation can be measured.
This will allow to identify financial fragmentation risks to stability
and productivity and judge them on their merits under a legitimate
analytical framework. As many of the above issues are of particularimportance to specific sectors, we expect further, technical detail on
these issues to follow from sector-specific organisations.

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FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

G7 RECOMMENDATIONS:• G7 to take steps to preserve an open, and resilient financial
system, by promoting global trade through a strengthened
collaboration with the WTO and championing of its agenda.

• 	G7 to support the FSB in pursuing its agenda on financial market
regulatory coherence to promote strong, sustainable, balanced
and inclusive growth.

• G7 to broker a principles-based approach to data localisation,with jurisdictions accepting that the free flow of data shouldbe the default, with only specific narrow exceptions that are
objectively justified; this should include acknowledging andrecognising the adherence to core principles of data protection
standards, rather than expecting identical laws, developed using
the principles set out in Part Two of the OECD Guidelines21 as astarting point.

• G 7 to call for the resolution of Basel III timetables, by
co-ordinating the implementation of Basel 3.1, synchronisingmarket risk reforms and potentially adjusting the global deadlineof 01 January 2023.
• G
 7 to call for the Financial Stability Board to undertakea stock-take of bank branch and subsidiary requirements.

“The UK can demonstrateleadership by developing
proactive policy solutions to
help reduce corporate leverage
post pandemic.”
1221

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FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

2.

LEADERSHIP ON SUSTAINABLE FINANCE
AHEAD OF COP26

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FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

With the UK assuming the G7 presidency in January 2021 andco-hosting alongside Italy the 26th UN Climate Change Conferenceof the Parties (COP26) in Glasgow on 1 – 12 November 2021, thisis an opportune moment to achieve real progress on the climate
agenda through strong leadership on sustainable finance.
Climate, sustainability and responsible finance have emerged
as main issues for the FRPS industry. The industry would welcome
continued UK focus on furthering policy development onsustainable finance, including on climate-related financial disclosures.
This needs to be developed in a way that is sensitive to the rapidlychanging dynamics of the market and avoids a level prescriptionthat turns it into a “box ticking” exercise rather something that isembedded in businesses. Commitment to this agenda varies globallyand the UK should utilise its presidency to drive progress in this area
among the G7 and work with the Italian G20 Presidency to broaden
the consensus.
Over the past decade, the UK has cut carbon emissions by morethan any similar developed country and was the first major
economy to legislate for net zero emissions by 2050. In April the
UK Government committed to set in law world’s most ambitious
climate change target, cutting emissions by 78% by 2035 compared
to 1990 levels.2222 	
https://www.gov.uk/government/news/uk-enshrines-new-target-in-law-to-slash-emissions-by-78-by-2035

However, the current levels of net-zero investment need to be scaled
up rapidly. As the London School of Economics states there needs tobe a five-fold increase in extra net-zero investment in the UK from circa£10bn/year in 2020 to around £50bn in 2030 if we were to achieve thetarget of net-zero.23 The lack of this investment in emerging markets
further compounds the global problem.
The issue of scaling voluntary carbon markets and the industry’s
approach to fossil fuels is another area of concern. In fact, the recently
set up Taskforce on Scaling Voluntary Carbon Markets (TSVCM),
sponsored by the Institute of International Finance (IIF) with support
from McKinsey, estimates that demand for carbon credits could
increase by a factor of 15 or more by 2030 and by a factor of up to
100 by 2050.24 Nevertheless, current levels of carbon market trading
activity require substantial scaling.
The foundation of any green or sustainable investment is data, notably,
climate-related and sustainability-related risk reporting and disclosuresand the related issue of taxonomies. On disclosures the FSB’s Task
Force on Climate-related Financial Disclosures (TCFD) figures arepromising with total TCFD supporters: +2,000; market cap: $20 trillion;
number of Financial Firms: 880; financial firms responsible for assets of:$178 trillion and number of countries represented: 78.

23 	https://www.lse.ac.uk/granthaminstitute/news/financing-net-zero-mobilising-the-money-for-action-on-theground/24 https://www.mckinsey.com/business-functions/sustainability/our-insights/a-blueprint-for-scaling-voluntary-carbonmarkets-to-meet-the-climate-challenge#:~:text=The%20Taskforce%20on%20Scaling%20Voluntary,up%20to%20
100%20by%202050

14

FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

However, there are still gaps in TCFD adoption amongst jurisdictions,which may prevent flows of investment towards sustainableassets. There is also a lack of global consensus on how to drive
global commitment towards TCFD reporting and around the
IFRS Foundation’s proposal on sustainability reporting and theSustainability Standard Board. Indeed, the IFRS Foundation canserve as the go-to avenue for addressing fragmentation risk on
disclosures. And, on taxonomies, there is not currently one global
taxonomy or classification enabling easy comparison of climate andsustainability credentials by companies. The G20 Sustainable FinanceWorking Group can serve a useful role in developing taxonomy
principles, to allow interoperability of taxonomies.
By making faster progress on key elements required to achieve thecommitments made in Paris five years ago, G7 leaders can assurea pathway to a successful COP26 in Glasgow and pave the road todeliver net zero emissions globally.

The IRSG agrees that when promoting and building robust andconsistent green financial market frameworks, UK action should
broadly focus on two areas - ‘greening of finance’, such as promoting
coherence and global consensus on climate-related risk reportingand disclosures, and ‘financing green’, such as the development of
new green financial products and services, with a commonly-agreed
sustainable product naming convention, or improving access tofinance for green investment, or building skills and capabilities ongreen finance. Global efforts to develop taxonomies on climate andsustainability will be a crucial starting point.
To that end, we welcome the Financial Stability Board’s efforts toaddress climate-related financial risks as outlined in Randy Quarles’
letter to G20 Finance Ministers25, which states that in this endeavour
towards a coordinated and forward-looking roadmap to addressthese risks, the FSB has invited the Network for Greening the
Financial System (NGFS) to participate in FSB climate-related work,and the FSB will apply for observer status in the NGFS.

The Government’s Green Finance Strategy’s objective to align private
sector financial flows with green and sustainable growth, in order
to consolidate the UK’s position as a hub for green finance is equally
relevant to both the UK’s G7 presidency and the UK’s COP26 copresidency. The UK’s leadership can deliver in a number of areas,
working towards ensuring that climate and environmental financial
risks and opportunities are integrated into financial decision making,and that markets for green financial products are robust and resilient
post-crisis.

1525

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FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

Financing green
Investment flows towards green finance
G7 Finance Ministers and Central Bank Governors should acknowledge
that reconfiguring the financial system, while necessary, will not be
sufficient to achieve net zero targets. A whole economy approachis needed with macro- and micro-economic policy and regulationaligned towards this objective across all sectors. In addition to green
and sustainable financial products and services, the global economy
needs to recognise the role of transition in finance. Most activities
can play a part in the transition to net zero and financial sector policy
should reflect this. Engagement with rather than divestment fromhigh carbon sectors can support the green transition and investment
to transform those sectors rapidly should be prioritised. With that,the role of green taxonomies is crucial to incentivise investmentsthat align with net-zero carbon commitments and the Paris Climate
Agreement. In the absence of a clear and robust definition of what
constitutes ‘green’ projects or activities, risks of greenwashing remain
and investors will not be able to efficiently compare financial products
promoting or presenting environmental characteristics. However, it
is important that taxonomies also include transition activities not justdark green activities.

In cooperation with the FRPS sector, the government should
utilise its presidency to accelerate the growth of green finance, by
catalysing the global investment flows needed, including throughnew public-private funds, building green skills across the financial
sector and mobilising climate finance into emerging markets.
It should also focus efforts on ensuring as much compatibility
as possible between jurisdictions’ efforts in this space and drive
innovation in ESG products with a commonly-agreed productnaming convention. The government should work with establishedorganisations, regulators and standard setters in this space toestablish long-term policy frameworks through new regulations,
including on energy efficiency standards.

G7 RECOMMENDATIONS:• G
 7 to continue to promote green and responsible financefor the recovery by working alongside other jurisdictions toensure compatibility and develop a set of guiding principles forsustainable product naming/labelling, guiding consumers andinvestment flows towards sustainable assets, and leveraging publicprivate partnerships to a pipeline of investable opportunities, aswell as mobilising climate finance into emerging markets.
• T hrough the UK’s work on COP26, the G7 presidency to promote
the role of transition finance towards a whole economy approachto net-zero.


16

FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

Net-zero and carbon markets
Pricing carbon is recognised by economists as the best mechanism
to achieve green transition in the most cost effective way, Fossil
fuel subsidies, explicit and implicit, are slowing the energy
transition and their impact needs to be recognised and reduced,
ideally by their removal. This has been committed to many times,
but advanced economies must set an example by removing subsidies
for fossil fuel. At the same time, carbon offsetting has a role to playin achieving net zero and increasing carbon sequestration.
With opportunities arising from COP26, the UK should drive global
commitment among the G7, the G20 and beyond towards net zerotargets ahead of COP26. Specifically, there is an opportunity for the
G7 to support the development of Core Carbon Principles by the
Task Force on Scaling Voluntary Carbon Markets alongside the set-upof a governing body26.

G7 RECOMMENDATIONS:• G
 7 to drive global commitment among the G7, the G20 andbeyond towards net zero targets, with the scaling of voluntarycarbon markets and robust carbon pricing and net zero financestrategies including with green job creation, ahead of COP26.
• G
 7 to agree to recognise the role of carbon pricing as amechanism to assign a real value to emissions reduction.
• G 7 to agree to establish principles for credible carbon offsetting
to support net zero.
• G
 7 to support the development of Core Carbon Principles by the
Task Force on Scaling Voluntary Carbon Markets alongside the
set-up of a governing body.

“With opportunities arising from
COP26, the UK should drive
global commitment among theG7, the G20 and beyond towards
net zero targets.”
1726

https://www.iif.com/Portals/1/Files/TSVCM_Report.pdf

FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

Greening finance
TCFD disclosures
On climate-related financial disclosures, the UK’s G7 presidency
presents an important opportunity for the UK to lead on global
regulatory coherence issues arising out of insufficient or inconsistentreporting of climate-related and broader sustainability risks.
Incoherence and lack of commitment from significant jurisdictions
here can present major challenges, and the UK can play a pivotal
role in achieving consensus in this area and ensure climate-related
risk reporting is robust across the board, globally.
In light of the recent UK TCFD Taskforce Roadmap and theChancellor’s commitment to mandatory TCFD disclosures acrossthe UK economy by 2025, the G7 presidency can play a pivotal
role in building global consensus towards TCFD reporting. The UK
can equally play a role in reinforcing the development of global
sustainability disclosure standards following the UK authorities’
supportive response to the IFRS Foundation’s proposal for a global
approach to sustainability reporting and on possible Foundationrole. Indeed, the UK is not alone in making strides towards climate
risk reporting. For instance, New Zealand has shown leadership on
mandatory reporting with the introduction of a climate change law
for financial firms.27
The intervention of the IFRS towards a global reporting standard
is welcome and will assist the progression of climate-related
disclosures. We call for regulatory approaches to achieve better27	
https://www.reuters.com/business/sustainable-business/new-zealand-introduces-climate-change-law-financialfirms-world-first-2021-04-12/

and comparable data and disclosure around a harmonised
framework/taxonomy as it will support the efficient reorientationof investment towards sustainability, support climate risk
management, and reduce risk mispricing.
The IRSG welcomes that FSB has been asked by the G20 toreport in July on ways to promote consistent, high-quality climate
disclosures that are in line with the recommendations of the Task
Force on Climate-related Financial Disclosure and on the datanecessary for the assessment of financial stability risks and wheredata gaps remain.

G7 RECOMMENDATIONS:• G
 7 to foster global regulatory coherence on climate-related
and sustainability-related risk reporting and disclosures bybuilding global consensus on disclosures and tackling the gaps
in TCFD adoption amongst jurisdictions, with driving global
commitment towards TCFD reporting and around the IFRSFoundation’s proposal on sustainability reporting, making
progress on issuer disclosure standards, in collaboration withprivate standard setters.
• G
 7 Leaders to take steps to ensure that the capital framework forthe financial sector is sensitive to environmental risks, including
but not limited to, climate change.

18

FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

Climate and sustainability taxonomies
While climate and sustainability disclosure will be an immediatepriority, it should also be noted that in addition, currently there is
no global classification for climate and sustainability. Jurisdictions
have chosen to approach this at differing speeds, with some, notably
the European Union, moving ahead with the creation of its own
taxonomy while others have lagged behind.
To avoid fragmentation in this space, the UK’s G7 presidency
should drive agreement towards the alignment of taxonomies
and classification frameworks around core principles including
harmonised reporting, recognition of location of the activity
being classified, and accommodating transition, particularly inless developed economies. We suggest that the new IFRS
proposed Sustainability Standards Board is used as a vehicle
for this and for aligning taxonomies, especially in light of the
FSB’s endorsement of IFRS.

G7 RECOMMENDATIONS:• G7 to agree to commission, in partnership with the G20,
the development of a common set of core/guiding principles
to inform the design of sustainable taxonomies, enabling
interoperability, and the mapping of transition as well as‘transited’ activities.

19

FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

3.

DIGITAL POLICY CONTINUITY,INCLUDING ON DIGITAL TAXATION

20

FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCYThe UK’s G7 presidency predecessors prioritised digital policy
during their presidencies. Both, France and the United States madeinroads on digital policy, including on data and technology, as well
as digital taxation. The OECD has led work in this area with its digitaltaxation framework and the UK should, through its G7 Presidency
help reach an agreement on this framework, as well as advancedigital policy work initiated by past presidencies. We welcome theG7 Ministerial Declaration published on 28 April, which sets out
the G7’s commitment to working together across vital areas ofdigital policy28.
The pandemic has accelerated digitalisation and with this, the
FRPS sector, too, has experienced challenges and opportunities.
As FRPS workforces have migrated to working online, the issue ofdigitally upskilling the general workforce and boosting employment
in IT skills has become even more pertinent. According to a reportcommissioned by The Open University, one in three (32%) seniorbusiness leaders report that their organisation does not have theskills required to adapt to new technologies, which many believe
is already having an impact on productivity. In the South West of
England, this issue is even more prevalent, with 56% of employers
reporting that their organisation lacks the skills required. Moreover,
the UK skills shortage is costing organisations £6.3 billion.29

28
29

https://www.gov.uk/government/publications/g7-digital-and-technology-ministerial-declaration
http://www.open.ac.uk/business/apprenticeships/blog/uk-skills-shortage-costing-organisations-%C2%A363billion

This year, we have also witnessed the systemic importance of digitaltechnology provision for business. Last year, the FSB warned banks
about the “possibility of systemic risk” from outsourcing to a few
third-party technology companies. In the wake of the Wirecard
scandal, the FSB raised concern over a trend for financial institutions
collectively to use fewer third-party technology providers, indicatingthat a fault in one third party may lead to financial instability.30 The
IRSG welcomed the FSB’s public consultation on the discussion paper
on Regulatory and Supervisory Issues Relating to Outsourcing andThird-Party Relationships and responded to it last year, setting out its
preferred approach to outsourcing.31
Cyber security has been impacted by the changing landscape ofdigital provision. Earlier in the paper, we shared how reputational
issues for the financial services sector have come to the fore with
online financial scams on the rise and the work done by industry
bodies such as UK Finance to tackle online crime. With that, comequestions to governments and regulators about how they regulate
and supervise the digital landscape and what is required to do so
efficiently. A coherent approach to digital taxation and a global
data standard is crucial.

“The pandemic has accelerated
digitalisation and with
this, the FRPS sector, too,has experienced challenges
and opportunities.”
30
31

https://www.technologymagazine.com/it-procurement/outsourcing-technology-systemic-risk-banks
https://www.fsb.org/wp-content/uploads/International-Regulatory-Strategy-Group.pdf

21

FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

Digital taxation

Outsourcing

The IRSG welcomes policy continuity in this area, to utilise themomentum already achieved among the G7. With its digital expertise,
the UK is well placed to drive consensus on issues such as digitaltaxation during its presidency. We welcome the commitment fromthe G20 to finalise this work by mid-2021, and the G7 has a criticalrole to play in helping lay the foundations for a consensus at the G20.

Many challenges in this area will be new and time-sensitive, andthe UK’s leadership of the G7 this year has the potential to achievesignificant progress here. The IRSG recognises the potential risk
arising from the concentration of outsourcing to large technology
vendors, which is especially pertinent now due to the increasing
reliance on technological solutions post-pandemic and the rise ofhome working.

G7 RECOMMENDATIONS:The IRSG also notes that more recently, the UK’s Financial Conduct
Authority (FCA) and the Prudential Regulation Authority (PRA) havefocused on interdependencies of the financial system (3rd party
included) and the non-technology risks associated with third parties,
as highlighted in the FCA’s Policy Statement 21/3 on operational
resilience: “Generally respondents had a positive experience
with the scalability and security of services received from cloudproviders, but the pandemic highlighted increasing dependence
on third parties and outsourcing arrangements. For example, somefirms experienced challenges with offshore third-party providers,
particularly where providers were under lockdown in anothergeographical location, which affected continuity of service to UK
consumers”.32• G
 7 to support continuity on G7 policy on digital taxation,
by calling for an agreement on the OECD’s digital taxation
framework this year.

The PRA’s Supervisory Statement 2/21 on outsourcing and thirdparty risk highlighted that intra-group arrangements can pose
similar risk as “material outsourcing”, and highlighted a “technology
agnostic” view to “materiality”.33

32	
https://www.fca.org.uk/publication/policy/ps21-3-operational-resilience.pdf
33	
https://www.bankofengland.co.uk/prudential-regulation/publication/2021/march/outsourcing-and-thirdparty-risk-management-ss

22

FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

It is evident that in the context of operational resilience,
policymakers and financial regulators need to co-ordinate theirefforts to ensure regulated entities have appropriate risk mitigation
measures for such a risk. Any solution is likely to involve more direct
co-operation between large vendors and regulators, with coordinated approaches to risk mitigation and management.
The technology sector has also done considerable work during
the pandemic in enabling large-scale home working globally.

G7 RECOMMENDATIONS:• G
 7 to drive the development of a consistent global
regulatory approach and methodology, with cross-governmental
support, including to address market-wide concentration risk
from outsourcing to large technology vendors and prevent the
localisation of data.

Crucially, it is important to recognise that market-wide concentration
risk is not something that can be fully managed by individual
financial institutions themselves, short of withdrawing from key
contracts that in many cases are not easily substitutable. Many large
technology vendors provide crucial services that benefit financial
institutions and their customers via cost and efficiency savings aswell as resiliency benefits and IRSG does not therefore believe that
ending contracts with vendors due to market-wide concentration
risk is a viable or desirable solution. It is important to foster theend-to-end assessment of vulnerabilities from a services lens andto focus on greater use of forecasted scenario analysis.
The IRSG welcomed and responded to the FSB’s recent consultationon this topic and value the UK’s current leadership in furthering thiswork. There is a need for a wider cross-government approach to
management of outsourcing policy challenges and G7 leaders can
set an early example that co-operative solutions can be found to
avoid fragmentation and the promotion of national champions.

“There is a need for a wider
cross-government approach to
management of outsourcing
policy challenges and G7 leaders
can set an early example.”
23

FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

Global data standard
The presidency is also an opportunity to call for a global standard on
data across the G7 and G20 to tackle fragmentation risks from data
localisation laws across jurisdictions. The UK should lead the charge
towards greater international consistency around privacy regulation
as this would greatly facilitate global data flows. As mentioned
earlier, data localisation and global regulatory fragmentation can
increase risks including cyber security and anti-money laundering.
Global data flows represent the next frontier of global cooperation,and following the G20’s lead, the G7 should explore how the freeflow of data can be facilitated via a global data standard. This and amore effective global governance will be critical to facilitating global
economic growth and ensuring that small and developing countries
can continue to participate in the global economy. Groundwork has
been laid with agreements such as the USMCA, CPTPP, Japan/UK,
which are all FTAs with comprehensive data localisation provisions.
A new network of advanced digital agreements is being developed
which include the Singapore-Australia digital economy agreement.34
At the multilateral level, some of the same issues are relevant to the
WTO E-Commerce JSI, OECD data protection standards and theCouncil of Europe’s Convention 108, all of which may contribute to
global data standards.
The G7 is ideally placed to encourage progress in this area given theability of a relatively small number of like-minded jurisdictions to set
the standard on what good looks like and to broker a core criticalhigh-level commitment globally. Ideally, G7 national authorities
would consider a common framework that establishes what tools

and procedures could be used to address common localisation
issues, and a process for establishing cost-benefit considerations
where these do not apply so that a localisation decision is subject
to appropriate scrutiny.
Appreciating that arriving at a global data standard may be alengthy process, immediate steps should be taken en route toa standard. To that end, data interoperability through a global
taxonomy on data will be the first necessary step to take.

G7 RECOMMENDATIONS:• G
 7 to address the lack of a global data standard, andto agree to examine a framework that could improve the global
governance framework for data flows. This may include a new
global body to create and manage a global data standard on
data governance, with data interoperability through a global
taxonomy on data being its first task.
• G 7 to promote greater international consistency around privacy
regulation to facilitate global data flows by increasing mutual
trust in other jurisdictions’ privacy regimes.
• G 7 to develop a common framework for managing regulatory
intentions to requiring the localisation of data and seek alternative
solutions where possible.

24
34

https://www.dfat.gov.au/trade/services-and-digital-trade/australia-and-singapore-digital-economy-agreement

FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

Cyber security
To leverage UK’s expertise in this area, we would also welcome UK’s
leadership in promoting public-private partnership models on antimoney laundering and cyber security measures, with the objective totackle global financial crime, which is a major drain on the economy.
Growing financial market fragmentation, and politicisation of financial
infrastructure through sanctions that isolate jurisdictions, increase therisk of state-sponsored cyber-attacks on systemic financial services
market infrastructure and banks. We recommend the G7 Leaders
should establish a principle to ‘do no harm’ to financial services
systems among like-minded countries to set an example to wider
groupings such as the G20. The Cyber Security Profile35, managed
by the Cyber Risk Institute, referred to as the Profile, is a powerfultool to assist banks to mitigate the cost of fragmented cybersecurity
regulations – incorporating national requirements from across theglobe. Over time, it should become the accepted supervisory base-line
upon which national variations can be established so supervisors andbanks alike can more efficiently use scarce cyber security expertise.

G7 RECOMMENDATIONS:• G
 7 to lead on combating economic crime, corruption andillicit finance by tasking the G7 Cyber Expert Group to develop
methodologies to achieve a common regulatory and supervisory
approaches to achieve global beneficial ownership reform.
• G7
 to call for the adoption of the Profile managed by the Cyber
Risk Institute as the accepted supervisory base-line upon which
national variations can be established for supervisors.

“The Cyber Security Profile is a
powerful tool to assist banks tomitigate the cost of fragmented
cybersecurity regulations.
Over time, it should become
the accepted supervisorybase-line upon which nationalvariations can be established.”
25
35

https://cyberriskinstitute.org/the-profile/FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY4.

ALIGNMENT WITH G20
GLOBAL POLICY PRIORITIES

26

FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

It will be important for the UK’s presidency to align with the G20’s
wider objectives for the global economy. This will call for a nuanced
approach, bearing in mind the potential tensions arising between
the priorities for the global economy and those for individual
countries, different countries’ strategies for reshoring or shortening
global supply chains, and the likelihood of policies to address
perceived disadvantages and/or adverse effects of globalisation.
Discussion among the G20 is bound to be affected by theseissues. We would urge nonetheless that there should be a focus on
specific objectives for financial services with an eye to continuity inaddressing key themes, as outlined by the Saudi G20 presidency.
These include promoting sustainable and inclusive pandemic
recovery, fostering private sector participation in infrastructure
investment and promoting digital financial inclusion. The UK should
use its G7 Presidency to:• L everage cooperation on financial services policy
with Italian G20 presidency for recovery;• S upport continuity on financial services objectivesof Saudi G20 presidency and continuity on fragmentation
agenda highlighted by the Japanese G20 presidency.

G20 cooperation and policy continuity
The UK’s G7 presidency provides an opportunity to engage withother major economies and promote the FRPS industry asks, throughcloser alignment with the G20. The UK’s G7 presidency should
prioritise engagement and closer policy alignment with its Italian G20
presidency counterparts, to utilize the opportunity to bring key global
decision makers together to address the pandemic and to promote
the importance of joint action. Indeed, synergies have alreadyemerged between this year’s G7 themes of Response, Recovery and
Resilience and G20 themes of Population, Planet and Prosperity.
For Italy’s G20 presidency, the latter three will be key themes thisyear with inclusion as a cross cutting issue. In light of Covid-19, Italy
has indicated for banks and non-bank regulation a focus on potential
flexibility for prudential standards, potential sources of pro-cyclicality,
as well as a review of the adequacy of the existing crisis management
frameworks. In addition, the G20 Presidency will look at financial
stability risks arising from a possible wave of corporate insolvencies
as well as the unwinding of current emergency measures.

27

FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

Furthermore, in response to the clear evidence towards a shift tomore sustainable investment since the outbreak of COVID-19, theItalian Presidency should continue to encourage, through properly
designed regulation and the adequate provision of information,
preventing the risk of “green washing” practices in the provision ofsustainability scores by the rating industry. In the lead up to COP26,
the Italian Presidency should strive to bring “climate cooperation”
to the centre of debate also within the G20.
Digital and financial awareness is a second major theme. The Bankof Italy is committed to delivering on the G20 financial inclusion
agenda. The Presidency will look to foster more innovative
regulatory and supervisory approaches to steer and encourage thedevelopment of inclusive and responsible digital financial services
while granting an adequate protection to final customers, not leastfrom cyber risk.
It will also be important for the UK’s presidency to align with
the G20’s wider objectives for the global economy, but also on
specific objectives for the financial services sector. In this regard,
we would welcome continuity on key themes for financial services,as outlined by the Saudi G20 presidency, including promoting
sustainable and inclusive pandemic recovery, fostering private sector
participation in infrastructure investment, smooth transition awayfrom LIBOR, addressing capital flow volatility, and promoting digitalfinancial inclusion.

G7 RECOMMENDATIONS:• G
 7 to leverage cooperation on financial services policy
with Italian G20 presidency for recovery via the mechanism of
G7 and G20 Ministerial meeting schedule and key stakeholder
bodies, such as cooperation with the B20 Finance andInfrastructure Taskforce.
• G
 7 presidency to leverage COP26 as an opportunity to maximise
its legacy on mutual climate and sustainability deliverables via
cooperation with Italy’s G20 presidency.
• G 7 to support continuity on financial services objectives of Saudi
G20 presidency by reflecting progress made on key deliverables
such as financial inclusion, in the UK’s G7 agenda.

“The Italian Presidency will look tofoster more innovative regulatory
and supervisory approaches to steer
and encourage the developmentof inclusive and responsible digitalfinancial services while granting
an adequate protection to final
customers, not least from cyber risk.”
28

SECTION 1

SECTION 2

SECTION 1

FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCYSECTION 2

CONCLUSIONSECTION 2

SECTION 3

SECTION 3

SECTION 4

It is evident that there are a number of areas where the UK
government can achieve significant progress during its G7
presidency, be it on pandemic recovery, on climate or on thedigital agenda, by building on the efforts of its G7 presidency
predecessors, and through collaboration with its counterparts in
the Italian G20 presidency next year, and the UK FRPS industry
believes that it can offer a valuable contribution to this work.

SECTION 1
SECTION 2
SECTION 3
SECTION 4

SECTION 3

SECTION 1

SECTION 4

SECTION 2
SECTION 3

SECTIONSECTION
4 1

SECTION 4

SECTION 2

SECTION 1
SECTION 3
SECTION 2
SECTION 4
SECTION 3
SECTION 4

SECTION 1

29

SECTION 1

SECTION 2

SECTION 1

FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCYSECTION 2

SECTION 2

ANNEX
SECTION 3
G7 RECOMMENDATIONSSECTION 3

SECTION 4
SECTION 1
SECTION 2
SECTION 3
SECTION 4

SECTION 3

SECTION 1

SECTION 4

SECTION 2
SECTION 3

SECTIONSECTION
4 1

SECTION 4

SECTION 2

SECTION 1
SECTION 3
SECTION 2
SECTION 4
SECTION 3
SECTION 4

SECTION 1

30

FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

REGULATORY COHERENCE FOR PANDEMIC RECOVERY,
1.	GLOBAL
RECAPITALISATION AND RESOLUTION• G
 7 to aid the set-up of public-private forums to develop new
schemes and run corporate education programmes, building on
existing thought leadership on recapitalisation.

• G 7 to support the FSB in pursuing its agenda on financial market
regulatory coherence to promote strong, sustainable, balanced
and inclusive growth.

• G 7 to ask the Financial Stability Board to convene a forum of
its membership to share best practice and draw up a plan on
securing corporate recapitalisation at scale, based on productive
finance principles, including a menu of options for addressing
zombie debt risks arising from the pandemic.

• G
 7 to call for the resolution of Basel III timetables, by coordinating the implementation of Basel 3.1, synchronising market
risk reforms and potentially adjusting the global deadline of 01
January 2023.

• G
 7 to take steps to preserve an open, and resilient financial
system, by promoting global trade through a strengthened
collaboration with the WTO and championing of its agenda.

• G
 7 to call for the Financial Stability Board to undertake a stocktake of bank branch and subsidiary requirements.

• G
 7 to broker a principles-based approach to data localisation,with jurisdictions accepting that the free flow of data shouldbe the default, with only specific narrow exceptions that are
objectively justified; this should include acknowledging andrecognising the adherence to core principles of data protection
standards, rather than expecting identical laws, developed using
the principles set out in Part Two of the OECD Guidelines36 as astarting point.

31
36

Accessible at http://www.oecd.org/sti/ieconomy/oecd_privacy_framework.pdf

FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

2. LEADERSHIP ON SUSTAINABLE FINANCE AHEAD OF COP26• G
 7 to continue to promote green and responsible finance for therecovery by working alongside other jurisdictions to minimise
divergence and develop a set of guiding principles for sustainableproduct naming/labelling, guiding consumers and investment
flows towards sustainable assets, and leveraging public-private
partnerships to a pipeline of investable opportunities, as well as
mobilising climate finance into emerging markets.
• T hrough the UK’s work on COP26, the G7 presidency to promote
the role of transition finance towards a whole economy approachto net zero.
• G
 7 to drive global commitment among the G7, the G20 andbeyond towards net zero targets, with the scaling of voluntarycarbon markets and robust carbon pricing and net zero financestrategies including with green job creation, ahead of COP26.
• G7
 to agree to recognise the role of carbon pricing as amechanism to assign a real value to emissions reduction.
• G 7 to agree to establish principles for credible carbon offsetting
to support net zero.

• G7 to support the development of Core Carbon Principles by the
Task Force on Scaling Voluntary Carbon Markets alongside the
set-up of a governing body.
• G7 to foster global regulatory coherence on climate-related andsustainability-related risk reporting and disclosures by building
global consensus on disclosures and tackling the gaps in TCFD
adoption amongst jurisdictions, with driving global commitment
towards TCFD reporting and around the IFRS Foundation’s
proposal on sustainability reporting, making progress on issuer
disclosure standards, in collaboration with private standard
setters.
• G7 Leaders to take steps to ensure that the capital framework forthe financial sector is sensitive to environmental risks, including
but not limited to, climate change.
• G7 to agree to commission, in partnership with the G20, thedevelopment of a common set of core/guiding principles
to inform the design of sustainable taxonomies, enabling
interoperability, and the mapping of transition as well as‘transited’ activities.

32

FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

3. DIGITAL POLICY CONTINUITY, INCLUDING ON DIGITAL TAXATION• G
 7 to support continuity on G7 policy on digital taxation,
by calling for an agreement on the OECD’s digital taxation
framework this year.

• G 7 to promote greater international consistency around privacy
regulation to facilitate global data flows by increasing mutual
trust in other jurisdictions’ privacy regimes.

• G 7 to drive the development of a consistent global regulatory
approach and methodology, with cross-governmental support,
including to address market-wide concentration risk fromoutsourcing to large technology vendors and prevent the
localisation of data.

• G 7 to develop a common framework for managing regulatory
intentions to requiring the localisation of data and seek alternative
solutions where possible.

• G
 7 to address the lack of a global data standard, and to agree to
examine a framework that could improve the global governanceframework for data flows. This may include a new global body tocreate and manage a global data standard on data governance,with data interoperability through a global taxonomy on data
being its first task.

• G 7 to lead on combating economic crime, corruption andillicit finance by tasking the G7 Cyber Expert Group to develop
methodologies to achieve a common regulatory and supervisory
approaches to achieve global beneficial ownership reform.
• G 7 to call for the adoption of the Profile managed by the Cyber
Risk Institute as the accepted supervisory base-line upon which
national variations can be established for supervisors.

33

FINANCIAL SERVICES PRIORITIES FOR THE UK’S G7 PRESIDENCY

4. ALIGNMENT WITH G20 GLOBAL POLICY PRIORITIES• 	G7 to leverage cooperation on financial services policy with
Italian G20 presidency for recovery via the mechanism of G7 andG20 Ministerial meeting schedule and key stakeholder bodies,such as cooperation with the B20 Finance and Infrastructure
Taskforce.
• 	G7 presidency to leverage COP26 as an opportunity to maximise
its legacy on mutual climate and sustainability deliverables via
cooperation with Italy’s G20 presidency.
• 	G7 to support continuity on financial services objectives of Saudi
G20 presidency by reflecting progress made on key deliverables
such as financial inclusion, in the UK’s G7 agenda.

34

The International Regulatory Strategy Group (IRSG) is apractitioner-led group comprising senior leaders from across the
UK-based financial and related professional services industry.
It is one of the leading cross-sectoral groups in Europe for theindustry to discuss and act upon regulatory developments.
With an overall goal of promoting sustainable economic growth,
the IRSG seeks to identify opportunities for engagement withgovernments, regulators and European and international institutions
to advocate an international framework that will facilitate open andcompetitive capital markets globally. Its role includes identifying
strategic level issues where a cross-sectoral position can add value
to existing views.

TheCityUK and the City of London Corporation
co-sponsor the IRSG.