In December 2022, the UK government announced a package of reforms to financial services regulations in the UK. The Financial Services reforms have been made, pending legislation that will come into effect later in 2023. So far, people have just been guaranteed that more consultation on specific areas is to follow. The announcement came after consultation with people from within the financial services industry after suggestions were put forward on improvements to UK regulations following Brexit.
One thing that is quite surprising about the reforms is that there aren’t many of the UK’s retained EU laws being revisited. It seems that the government is planning on keeping the majority of the EU financial services it originally inherited as part of the Brexit deal, with only a few tweaks made.
What Are the Reforms?
A large number of different reforms have been announced, and these include some of the following:
- Launching a call for evidence in reforming the Short Selling Regulation
- Repealing the previous Packaged Retail and Insurance-Based Investment Products Regulation whilst also consulting on a new direction for retail disclosure
- Completely reforming the Securitisation Regulation
- The publishing of a wholly updated Green Finance Strategy in the first quarter of 2023
- Bringing forward a lot of secondary legislation which will back up reforms, such as legislation which will assist with implementing the Wholesale Markets Review (discussed below)
- Putting together a task force for Accelerated Settlement
- Looking to get more independent, starting with the independent Investment Research Review
- Looking forward to 2024 and having a regime which will consolidate tape in the UK
- Reforming the current ring-fencing regime which is in place for banks
- Providing consultation on credit act reform
How Will Industries React to Reforms?
Until legislation is passed and put into force, it is hard to know precisely how well the reforms will be met; however, chances are a large majority of the industry will welcome them. This is because by not making too many changes to the retained laws, businesses can maintain the relationships they have with organisations in the EU and avoid the cost of wholesale regulatory change.
What Are the Aims of the Government with These Reforms?
The government has already set out what it hopes to achieve with these reforms. Some of the most noteworthy goals include the following:
- Building a Smarter Regulatory Framework for the Country
The government published a paper called “building a smarter regulatory framework for the UK,” which outlines a relatively ambitious plan for making the tweaks mentioned above to retained EU laws and embracing some of the opportunities presented upon leaving the EU.
- Updating the Ring-Fencing Regime and Bank Regulations
As mentioned above, the government has merely announced these reforms; nothing has been brought into action yet. That being said, later in 2023, they plan to bring forward secondary legislation to improve how functional the current ring-fencing regime works. The reforms are intended to benefit customers, the economy, and the financial services industry while still ensuring the appropriate financial safeguards are in place. They have also stated that they will review how practical the new ring-fencing regime will be in the first quarter of 2023.
- Ensuring There is Focus on Competitiveness and Growth
The government is also interested in turning its attention to ensure a better focus on international competitiveness and internal and external growth whilst also carrying out some primary objectives that already exist. Jeremy Hunt laid new remit letters before parliament that set out how regulators should regard the government’s new economic policy; this is all being done to further support the government’s aim of helping businesses grow and expand.
There is also going to be a Call for Evidence commenced on the Senior Managers & Certification Regime for 2023, which will allow them to see the legislative framework and how effective it currently is. This is an exercise to gather information and seek different views on potential reforms and improvements.
- Wholesale Market Reforms
The UK has always had a strong position in the global market. There has been a degree of economic uncertainty in recent years due to global and domestic issues. However, the government is determined to maintain its position as world leaders. One of the ways they intend to do this has been contained within the reforms and includes changes to the Markets in Financial Instruments Directive framework. Again, second legislation will be brought forward in the first quarter of 2023, which will further support this aim, to remove any burdens standing in the way of different firms trading. A review will also be launched, which will work out the functionality of the UK wholesale market and how competitive it currently is on a global scale.
Do You Need Help Navigating the New Reforms?
These reforms are yet to be actioned, and, as such, it is unclear how they will impact the real world. As such, it is expected that if you run a business to wonder how they might impact your organisation. If you require more information, it is worth reaching out to professionals and seeing if there is anything you can do differently to benefit you in the future.
At Leading UK, we have a team of experts in finance and liquidation who are on hand to assist with anything you need. We will stay on top of these different reforms and see how they apply in real-world situations. With this knowledge, we can look at your business and advise whether or not they will impact you. If you need more information or have any questions, please do not hesitate to get in touch.
