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We often present ourselves as being part of a generation plunged in a state of constant turbulence, the ones who stand to see the most change in our lifetimes thanks to transformations in everything from technology to climate to markets.
Yet on this very day, in 1866, a dramatic change was foisted on American consumers. Congress passed legislation which paved the way for a new metal to be used for coins. This 5 cent coin was largely made of copper with 25% nickel but became known as nickel and today, May 16th, is officially Nickel Day. Before this, coins were usually gold or silver but the American Civil War had destroyed monetary supply as people were hoarding precious metals.
An attempt to replace coins with paper currency was derailed after the then head of the Currency Bureau had his own face printed on the notes. This – along with a bit of lobbying from an industrialist who owned nickel mines – paved the way for Congress to introduce nickel coins. The money markets – like the coins that underpinned our system of finance – evolved out of necessity and continue to do so today.
Many of the rules that underpin the UK capital markets are historic, formed in the 1980s, and we cannot afford to stand still. But be in no doubt. The UK financial services market remains strong, as the Economic Secretary to the Treasury has already outlined, and as today’s insights report by UK Finance and EY exemplifies.
Yet we all agree for this to remain the case, we must continue to evolve – and in some areas – evolve rapidly.
UK financial services and the City have a unique position as a ‘full-service’ global wholesale market, with an integrated deep and broad ecosystem of expertise across banking, insurance, investment, accounting, legal services, and related services. Our financial services ecosystem is located alongside a deepening tech ecosystem.
We should not be shy about reflecting on some of our strengths:
In 2021, more than 3,000 fintechs were headquartered in the UK, four times more than Germany or France.
Our investment managers guard and grow over £11 trillion in assets. Yes, there has been a significant drop in the number of listed companies since 2008, in the UK and many other developed markets, and our market share has receded against fast growing powerhouses such as China and India.
The insights report shows that regulation is one of the factors firms take into account when deciding where to list. However, access to capital and investor perceptions are often bigger priorities.
At the FCA, we are working with industry, government and other regulators to grow our global excellence as a market.
Listings is an important part but just one part of that eco-system.
In saying that, we of course want to make the UK as attractive a place to list as possible, while maintaining high standards. That is why we have launched a blueprint for bold reform of the listings regime as set out in the consultation we published recently. We are delighted with the engagement and response to date.
We want to make the listing regime more accessible, effective, easier to understand and more competitive. This will benefit both issuers and investors. We want to make sure that UK public markets remain an attractive and trusted place to list companies, to support growth and innovation. Our proposed reforms are bold but build on the changes we have made over recent years – they take into account what market participants have told us that they value in the current regime. While the reforms will make it easier for firms to list and for a wider range of companies to list, they will also lead to a shift in responsibility and increased risk for shareholders.
We have made this clear in our proposed set of reforms – and have said that we want and need a public debate, and ideally then as wide a consensus as feasible, on risk appetite. That increased risk as a result of reforms will lead to losses, as well as gains. Are we ready for it? Today’s report highlights how UK households hold 10.6% of their financial assets in equity. Meanwhile, in the US, the figure is over 36%.
We think there is a strong and pressing case for change to refocus UK listed markets, but we want and encourage further views and evidence on the blueprint we have set out. And we want others in the ecosystem to align and play their part, alongside us.
Our work on listings is a key part of our commitment to strengthen the position of UK wholesale markets, which is a priority in our 3-year strategy and which we are supercharging in this year’s business plan – recognising the importance of the wholesale markets to the UK’s economy. In doing so, we are building on the foundations set out in the government’s previous UK wholesale markets review, and taking into account feedback from industry, from our statutory panels, and from our newly established secondary markets advisory committee. We want to ensure that our regulatory attention is focused on the areas which can support market excellence – achieving the aim of markets that work well, with market integrity and consumer protection....
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