UK chancellor Jeremy Hunt has launched a major reform of the UK's financial sector with plans to rip up red tape and replace reams of EU regulations.
Dubbed the "Edinburgh Reforms", the changes have been announced by the chancellor in the Scottish city on Friday as he heralded the "golden opportunity" Brexit provided to reshape the rules governing the financial sector.
Hunt set out a package of more than 30 regulatory reforms, with plans to "review, repeal and replace" hundreds of pages of EU regulations ranging from disclosure for financial products to prudential rules governing banks.
Any rules deemed to hold back growth or that put companies off listing in the UK will be review or overhauled, as part of the bid to create a "tailor-made" UK regulatory system.
The plans come as the government pushes ahead with efforts to end the UK's sluggish record on growth, after Liz Truss and Kwasi Kwarteng promised a similar set of reforms dubbed "Big Bang 2.0" – itself a reference to Margaret Thatcher's 1986 policies which kicked off a massive change in the City of London.
"This country's financial services sector is the powerhouse of the British economy, driving innovation, growth and prosperity across the country," Hunt said.
"Leaving the EU gives us a golden opportunity to reshape our regulatory regime and unleash the full potential of our formidable financial services sector."
Hunt, who will meet with finance CEOs in Edinburgh on Friday, said the government was delivering an "agile, proportionate and home-grown regulatory regime which will unlock investment across our economy to deliver jobs and opportunity for the British people".
While promising to protect consumers, the government is also set to announce changes to ring-fencing rules, which currently require large banks to separate retail and investment arms.
In his autumn statement, Hunt pledged to reform Solvency II, referring to the multi-trillion pound insurance sector, which will ease capital rules for the industry.
The Treasury said that reforms will build on that pledge, with the chancellor also expected to issue new mandates to the Financial Conduct Authority and the Prudential Regulation Authority to ensure both help "promote the international competitiveness of the UK".
Industry Reaction
Chris Cummings, chief executive of the Investment Association:
"Today’s Edinburgh Reforms are a very welcome acknowledgment of the need for reform to boost the UK’s place as a leading global financial services hub, and importantly, recognises the place of investment management at its heart ...
"The Financial Services and Markets Bill and these measures rightfully emphasize the need for the UK to remain competitive and innovative. It is essential that the FCA and PRA hone their focus on competitiveness and economic growth if the UK is to retain its position as the preeminent international financial centre and to continue to attract high levels of investment.
"For our industry, there are a number of measures that we are particularly pleased to see, including the Government’s support for the Long-Term Asset Fund (LTAF) initiative, which will help to open access to private markets while providing greater capital for long-term investment."
He also welcomed the Green Strategy plan, as well as proposals to revoke the Packaged Retail and Insurance-based Investment Products (PRIIPs) regulations.
Simon Harrington, head of public affairs at PIMFA agreed: “We welcome the Government’s move to revoke the PRIIPs regulation and look forward to engaging positively with the Treasury on an alternative framework for retail disclosures.
“It is imperative that any disclosure framework is, in future, able to ensure that the end customer is provided with the right information, and in the right way, in order to better understand the, at times, complex decisions they are making."
Anne Fairweather, head of government affairs and public policy, Hargreaves Lansdown also touched on PRIIPs: "The proposed review of PRIIPs and retail disclosures, those reams of paper you get when you take out an investment, is also welcome. The Treasury is looking to take a more proportional approach which should be linked to the FCA’s new consumer duty. The future regime should challenge firms to improve clients’ decision making and drive better outcomes rather than swamping them with paper."
She also touched upon changes to the prospectus regime and the LTAF initiative: "Retail investors are significant shareholders in UK listed companies yet consistently get frozen out when companies raise more capital or when new companies list. Changes to the prospectus regime should focus on levelling the playing field for retail investors and remove unnecessary hurdles from their participation in these investment opportunities.
"Today’s announcement that LTAFs are in the process of being authorised is good news [and] will allow for investment opportunities like private markets and infrastructure that have previously been hard to reach for modern workplace pensions and retail investors. The final FCA rules are due shortly which will set out how ordinary retail investors might be able to invest, but there remains need for reform to allow LTAFs to be held in ISA and SIPPs.”
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