Given the backdrop of a recent change in Prime Minister and substantial economic challenges within the UK, the Chancellor of the Exchequer Jeremy Hunt has unveiled the “Edinburgh Reforms” of UK financial services. These comprise over 30 regulatory changes to unlock investment and encourage growth across the UK.
These announcements built on the reform agenda and changes in the Financial Services and Markets Bill (“FSM Bill”).
The reforms include:
- Reforming the Ring-Fencing Regime for Banks, which was initially implemented to provide separation between investment banking (seen by the government as a higher risk operation) from retail operations, where the government will bring forward secondary legislation in 2023 to “improve the functionality” of the regime.
- Commencing a review into reforming the Senior Managers & Certification Regime in Q1 2023 with the government launching a Call for Evidence to look at the legislative framework of the regime considering effectiveness, scope and proportionality, and to seek views on potential improvements and reforms.
- Taking forward reforms to the Markets in Financial Instruments Directive (MiFID) framework through the Wholesale Markets Review.
- Bringing forward a consultation into a new central bank digital currency (described as a “sovereign digital pound”) looking at potential design, as well as the Bank of England releasing a Technology Working Paper setting out technological considerations informing the potential build.
- Publishing the Short Selling Regulation Review and ‘calling for evidence’ on the UK’s regime for regulating short selling.
- An overhaul of the prospectus regime, with the stated aim of looking to “widen participation in the ownership of public companies, simplify the capital raising process for companies on UK markets, and make the UK a more attractive destination for Initial Public Offerings”.
- Bringing forward “relevant reforms” identified in HM Treasury's 2021 review of the Securitisation Regulation.
In addition to the above, the Chancellor set out how the government is legislating through the FSM Bill to introduce new secondary objectives for the UK’s Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) of delivering growth and competitiveness, to provide “for a greater focus on growth and international competitiveness while maintaining their existing primary objectives”. The Chancellor has also taken the opportunity to issue new mandates setting out how the regulators can help deliver growth and make the UK more competitive.
Since the UK left the European Union there has been ongoing discussion and some uncertainty about the role of EU regulations retained in the UK. The Chancellor will provide a detailed timeline establishing the Government’s approach to repealing certain retained EU law. The intention is to create a regulatory framework for the UK which is agile, less costly and more response to emerging trends.
In order to help you gain a deeper understanding of what this means and how it may impact your business, our colleagues within the Deloitte Centre for Regulatory Strategy (EMEA) will be providing an in-depth and informed view on many of the proposals shortly - we would suggest keeping a close eye on these as we gain a better view of the potential impact over the short/medium term.
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