)
Briefing: The ‘Edinburgh Reforms’ of UK financial services
Overview and Analysis
The UK Chancellor, Jeremy Hunt MP, has unveiled a sweeping package of reforms to the UK’s financial services, promising to ‘unlock investment and turbocharge growth in towns and cities across the UK’. In a partly politically-motivated decision to distance himself from former Prime Minister Liz Truss’s highly unsuccessful and short-lived economic plans, the reforms attempt to seize the opportunities provided by Brexit freedoms, while moving away from certain safeguards originally designed to avoid another economic crash following 2008. This relatively bold package from Rishi Sunak’s new Government has over 30 reforms with hugely wide-ranging consequences, not just in financial services but also in sustainable energy finance and the wider ESG (ratings) sector.
The Government hopes to bring as many of these reforms as possible into law throughout 2023 so there remains a clear opportunity to influence the specific measures in the final legislation. The key points are summarised below but please do contact us or our UK team directly if you are likely to be impacted by these reforms and would like to discuss them further.
Key Themes
‘A competitive marketplace promoting effective use of capital’
“Building a smarter regulatory framework for the UK”
- Publishing the plan for repealing and reforming EU law using powers within the FSM Bill
Widening participation in the ownership of public companies, simplify the capital raising process and make the UK a more attractive destination for Initial Public Offerings.
- Intention to repeal EU legislation on the European Long-Term Investment Fund (ELTIF)
The newly established UK Long-Term Asset Fund (LTAF) provides a better fund structure for the UK market.
- Publication of the Short Selling Regulation Review
Aiming to put in place a regulatory regime tailored to the UK supporting market integrity.
- Publishing Package Retail and Insurance based Investment Products and UK Retail Disclosure consultation
Fostering more informed retail investor participation more effectively in the dynamic capital market.
- Reforming the Ring-Fencing Regime for Banks
To free retail focused banks from the regime to ease unnecessary regulatory burdens on firms.
- Issuing new remit letters for the PRA and FCA
Emphasising new secondary competitiveness objectives to facilitate international competitiveness.
- Overhauling the UK’s regulation of prospectuses
Making it more attractive for firms to list and raise capital in the UK.
- From April 2023, improving the tax rules for Real Estate Investment Trusts
Reducing friction and allowing savers to access high returns more easily.
- Committing to establish the independent Investment Research Review
Including EU MiFID unbundling rules.
- Consulting on reform to the VAT treatment of fund management
Proposing legislative reform to codify existing policy to give legal clarity and certainty.
‘A world leader in sustainable finance’
“Aligning the financial services sector with Net Zero and to support the sector to unlock the necessary private financing.”
- Publishing an updated Green Finance Strategy in early 2023
To ensure the financial system plays a major role in the delivery of the UK’s net-zero target.
- Consulting in Q1 2023 on bringing Environmental, Social, and Governance ratings providers into the regulatory perimeter
Ensuring these products are transparent and use consistent standards.
‘A sector at the forefront of technology and innovation’
“Ensuring that the regulatory framework supports innovation and leadership in emerging areas of finance, facilitating the adoption of cutting-edge technologies.”
- Consulting on a UK retail central bank digital currency alongside the Bank of England in the coming weeks
To one day see UK citizens using a digital pound.
- Publishing a response to the consultation on expanding the Investment Manager Exemption to include cryptoassets
Ensuring more overseas investment can flow into the sector.
- Implementing a Financial Market Infrastructure Sandbox in 2023
Allowing firms and regulators to safely test, adopt and scale new technologies that could transform financial markets.
- Working with regulators and market participants to trial a new class of wholesale market venue which would operate on an intermittent trading basis
Improving companies access to capital before they publicly list.
‘Delivering for consumers & businesses’
“Ensuring the sector is delivering for people and businesses across the UK”
- Consulting on Consumer Credit Act Reform
Simplifying the regime to encourage innovation in the credit sector and cutting costs for consumers and businesses.
- Laying regulations in early 2023 to remove well-designed performance fees from the pensions regulatory charge cap
Providing clarity for industry and ensure pension savers can benefit from investing in UK innovation.
- Committing to work with the FCA to examine the boundary between regulated financial advice and financial guidance
Improving access to helpful support, information and advice, while maintaining strong protections for consumers