The UK Government has today announced a package of reforms to UK financial services regulation. It mostly consists of promises to consult on specific areas for reform over the next couple of years. The announcement follows a period of consultation with the financial services industry and other stakeholders about improvements which can be made to UK regulation following Brexit.
One striking aspect of the package is how few of the UK's "retained EU laws" are being revisited. The current Government's plan appears to be to keep almost all of the EU financial services regulation it inherited at Brexit, with a few carefully selected tweaks. We expect large parts of the industry will welcome this, to maintain parity with the EU and avoid the cost of wholesale regulatory change. The Government is proposing to repeal the UK's version of the EU PRIIPS regime.
Some of the rules on the reform agenda are UK-specific post-financial crisis measures, such as the Senior Managers & Certification Regime and bank ring-fencing. But even here, the proposal is largely "reform" rather than "repeal". The Government has made it clear that it does not intend to rip up the rulebook. At the same time as this announcement, UK firms are preparing for the UK's new consumer duty regime and UK rules on TCFD and sustainable disclosure.
The UK does not look like it is heading for "light touch" regulation any time soon.
Below is the list of measures announced today:
- Repealing the Packaged Retail and Insurance-based Investment Products (PRIIPS) Regulation, and consulting on a new direction for retail disclosure
- Launching a Call for Evidence on reforming the Short Selling Regulation
- Reforming the Securitisation Regulation
- Intending to repeal EU legislation on the European Long-Term Investment Fund (ELTIF), reflecting that the new UK Long-Term Asset Fund (LTAF) provides a better fund structure for the UK market
- Commencing a review into reforming the Senior Managers & Certification Regime in Q1 2023
- Publishing an updated Green Finance Strategy in early 2023
- Consulting in Q1 2023 on bringing Environmental, Social and Governance ratings providers into the regulatory perimeter
- Consulting on a UK retail central bank digital currency alongside the Bank of England in the coming weeks
- Committing to work with the FCA to examine the boundary between regulated financial advice and financial guidance
- Bringing forward secondary legislation to implement Wholesale Markets Review reforms
- Establishing an Accelerated Settlement Taskforce
- Committing to establish the independent Investment Research Review
- Publishing the plan for repealing and reforming EU law using powers within the FSM Bill, building a smarter regulatory framework for the UK
- Publishing a draft Statutory Instrument to demonstrate how the new powers being taken forward in the FSM Bill will be used to ensure that the FCA has sufficient rulemaking powers over its retained EU payments legislation
- Issuing new remit letters for the PRA and FCA with clear, targeted recommendations on growth and international competitiveness
- Consulting on removing burdensome customer information requirements set out in the Payment Accounts Regulations 2015
- Committing to having a regime for a UK consolidated tape in place by 2024
- Implementing a Financial Market Infrastructure Sandbox in 2023
- Working with the regulators and market participants to trial a new class of wholesale market venue which would operate on an intermittent trading basis
- Reforming the Ring-Fencing Regime for Banks
- Overhauling the UK's regulation of prospectuses
- Welcoming the PRA consultation on removing rules for the capital deduction of certain non-performing exposures held by banks
- Consulting on Consumer Credit Act Reform
- Delivering the outcomes of the Secondary Capital Raising Review
- Announcing changes to the Building Societies Act 1986
- From April 2023, improving the tax rules for Real Estate Investment Trusts
- Consulting on reform to the VAT treatment of fund management
- Publishing a response to the consultation on expanding the Investment Manager Exemption to include cryptoassets
- Consulting, in early 2023, on issuing new guidance on Local Government Pension Scheme asset pooling
- Increasing the pace of consolidation in Defined Contribution pension schemes
- Laying regulations in early 2023 to remove well-designed performance fees from the pensions regulatory charge cap
If you would like further information or assistance in understanding the proposed reforms, please speak to your usual Travers Smith contact or any of the individuals below. We will also be looking at some of these things in more detail in our 2023 New Year Briefing.