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Chancellor of the Exchequer Jeremy Hunt unveils new “Edinburgh
Reforms” of financial services, to help turbocharge growth and deliver a
smarter and home-grown regulatory framework for the UK – that is both
agile and proportionate.
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Speaking at an industry roundtable in Edinburgh today, the
Chancellor will announce new plans to seize the benefits of Brexit by
setting out a detailed timeline establishing the government’s approach
to repealing burdensome pieces of retained EU law.
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Reforms deliver the next chapter of the government’s vision for UK financial services, set out at Mansion House 2021.
The Chancellor will set out plans to repeal, and replace, hundreds of
pages of burdensome EU retained laws governing financial services. This
will establish a smarter regulatory framework for the UK that, is
agile, less costly and more responsive to emerging trends.
These plans included a commitment to make substantial legislative
progress over the course of 2023 on repealing and replacing EU-era
Solvency II – the rules governing insurers balance sheets which is
expected to unlock over £100 billion of private investment for
productive assets such as UK infrastructure.
The financial services sector is vital for Britain’s economic
strength, contributing £216 billion a year to the UK economy. This
includes £76 billion in tax revenue, enough to fund the entire police
force and state school system, while employing over 2.3 million people -
with 1.4 million outside London.
As announced in the Autumn Statement, the government will look to
announce changes to EU regulations in four other high growth industries
by the end of next year, including digital technology, life sciences,
green industries and advanced manufacturing.
Chancellor of the Exchequer, Jeremy Hunt said:
We are committed to securing the UK’s status as one of the most
open, dynamic and competitive financial services hubs in the world.
The Edinburgh Reforms seize on our Brexit freedoms to deliver an
agile and home-grown regulatory regime that works in the interest of
British people and our businesses.
And we will go further – delivering reform of
burdensome EU laws that choke off growth in other industries such as
digital technology and life sciences.
Economic Secretary to the Treasury, Andrew Griffith said:
The UK is a financial services superpower – and we have long
benefited from, and are committed to, high quality regulatory standards.
Scotland’s role in maintaining our status as the global benchmark
for regulation is crucial - with Edinburgh and Glasgow the two largest
UK hubs outside of London.
Our reforms deliver smarter regulation of
financial services that will unlock growth and opportunity in towns and
cities across the UK.
The work to repeal, and where appropriate replace, retained EU law
governing the sector has been guided by industry – and split into two
initial tranches. These will focus on delivering reform to areas which
provide the most significant boost to UK growth and competitiveness, and
we will set out further detail on future tranches over time.
Today’s announcement delivers the next chapter in the roadmap for UK
announced at Mansion House 2021 for a UK financial services sector that
is open, sustainable, and technologically advanced - one that is
globally competitive and acts in the interests of communities and
citizens. This vision will create jobs, support businesses, and power
growth across all four parts of the UK.
The Edinburgh Reforms ensure that the UK’s financial markets are
among the most open and attractive in the world. They deliver this by
overhauling the UK prospectus regime to make it more attractive for
firms to list and raise capital here; reforming the rules governing Real
Estate Investment Trusts, to reduce friction and allow savers to more
easily access higher returns; formally reviewing the provision of
investment research in the UK, including the effects of the EU’s MiFID
unbundling rules, which aren’t applied in leading markets such as the
US; and working with the regulators and companies to trial a new class
of wholesale market venue that operates on an intermittent basis –
improving companies access to capital before they publicly list.
The government has also announced that the ring-fencing regime will
be reformed in response to the recommendations of the Skeoch Review -
including by freeing retail focussed banks from the regime – easing
unnecessary regulatory burdens on firms while maintaining protections
for depositors.
The Chancellor has also issued new remit letters to the Financial
Conduct Authority and Prudential Regulation Authority emphasising the
new secondary competitiveness objectives. Regulators will have a duty to
facilitate, subject to aligning with relevant international standards,
the international competitiveness of the UK economy and its growth in
the medium to long term.
We are committed to seeing financial service firms deploy more
capital in productive assets such as UK infrastructure and low carbon
and clean energy. This will be facilitated by Long-Term Asset Funds – a
new type of fund structure tailored to the UK market, replacing the EU’s
ineffective European Long Term Investment Fund regime, which will be
repealed from the UK rulebook. The LTAF regime has recently seen its
first application from an issuer of this new type of fund.
Delivering for consumers
The government is committed to enabling consumers to access the
benefits of new products and technologies, while ensuring they remain
protected. To support this, the government is today publishing its first
consultation on proposals to modernise the Consumer Credit Act –
simplifying the regime to encourage innovation in the credit sector and
cutting costs for consumers and businesses.
A sector at the forefront of innovation and technology
The reforms build on the UK’s desire to harness the benefits of
emerging technologies, including committing to shortly publish a
consultation on proposals to establish a UK Central Bank Digital
Currency– which could one day see Brits using a digital pound. Other
measures will see the Investment Management Exemption extended to
cryptoassets, ensuring more overseas investment can flow into the sector
– and the government has recommitted to establishing the Financial
Markets Infrastructure Sandbox in 2023, allowing firms and regulators to
safely test, adopt and scale new technologies that could transform
financial markets.
A world leader in sustainable finance
The UK is working to become the world’s first net-zero aligned
financial centre, and today’s measures will further deliver on this
ambition, including by committing to publish a new green finance
strategy in early 2023, and to consult on bringing Environmental, Social
and Governance (ESG) ratings providers into the City Watchdog’s
regulatory perimeter, to ensure these products are transparent and use
consistent standards. Achieving this ambition will see more investment
in sustainable energy supplies such as nuclear, hydrogen and offshore
wind – delivering new opportunities and well-paying jobs.
More broadly, the government’s Financial Services and Markets Bill
successfully completed its remaining stages in the Commons on Wednesday
and is expected to receive Royal Assent by Spring 2023. This further
delivers on the government’s vision for financial services, including by
bringing certain types of stablecoins within the payments regulatory
perimeter; protecting access to cash for millions of people that reply
on it; and enabling the Payments Systems Regulator to force banks to
reimburse the victims of Authorised Push Payment (APP) fraud.