The UK Government’s Edinburgh reforms at a glance

Chancellor Jeremy Hunt set out a list of 30 measures intended to boost UK financial service sector competitiveness.

The UK financial services sector employs 2.3 million people, mostly – and contrary to popular belief – outside London, and generates 13% of the country’s tax revenue. It’s been a central pillar of the country’s shift from manufacturing to service since the 1980s, suffered a crisis of confidence and trust in the wake of the 2008 global financial crash, and has seen Amsterdam overtake London in volume of shares traded since Brexit.

That’s the context in which UK Chancellor Jeremy Hunt has pitched a package of 30 measures, dubbed the Edinburgh reforms after the city in which his speech was made, intended – in the government’s own words – to be “a collection of announcements taking forward the government’s ambition for the UK to be the world’s most innovative and competitive global financial centre”.

What has been proposed

There’s much set out for consultation, and over the coming weeks we will carry regular informed comment on what the measures could mean for the sector – and particularly for compliance and regulation professionals. But before any comment, we wanted to set out simply what has been proposed.

The government says the 30 measures should be seen as a continuation of an approach that began with the Financial Services and Markets (FSM) Bill and the reform of Solvency II announced in the Autumn Statement. It identifies the foundations of the UK’s financial services sector as “agility, consistently high standards, and openness”. Its proposals are grouped into four blocks, titled “A competitive marketplace promoting effective use of capital”; “A world leader in sustainable finance”; “A sector at the forefront of technology and innovation” and “Delivering for consumers and business”.

Measures aimed at developing a competitive marketplace promoting effective use of capital are;

  • Reforming the bank ring-fencing regime.
  • Giving the FCA and PRA new remit letters with targeted recommendations on growth and international competitiveness.
  • Building “a smarter regulatory framework” for the UK by publishing the plan to reform EU law, using powers from the FSM Bill.
  • Overhauling regulation of prospectuses.
  • Reforming Securitisation Regulation.
  • Repealing Packaged Retail and Insurance-based Investment Products (PRIIPS), and consulting on a new direction for retail disclosure.
  • Providing notice of intention to repeal EU legislation on European Long-Term Investment Fund (ELTIF).
  • Launching call for evidence on reform of short-selling regulation.
  • Publishing draft statutory instrument to show how FSM Bill powers will be used to ensure the FCA has “sufficient” rulemaking powers over retained EU payments legislation.
  • Consulting on removing “burdensome” customer information requirements set out in Payments Accounts Regulations 2015.
  • Welcoming PRA consultation on removing rules for capital deduction of certain non-performing exposures held by banks.
  • Bringing forward secondary legislation to implement reforms set out in Wholesale Markets Review.
  • Establishing an Accelerated Settlement Taskforce.
  • Establishing independent Investment Research Review.
  • Reviewing Senior Managers & Certification Regime in Q1 2023.
  • Establishing UK consolidated tape regime by 2024.
  • Consulting on new guidance for Local Government Pension Scheme asset pooling, in early 2023.
  • Increasing pace of consolidation in Defined Contribution pension schemes.
  • Improving Real Estate Investment Trust tax rules, from April 2023.
  • Announcing changes to Building Societies act 1986.
  • Delivering outcomes of Secondary Capital Raising Review.
  • Consulting on reform to VAT treatment of fund management.

To enable the UK to become a world leader in sustainable finance, the UK government proposes to;

  • publish an updated Green finance Strategy in early 2023;
  • consult, during Q1 2023, on “bringing Environmental, Social and Governance ratings providers into the regulatory perimeter”.

Measures aimed at putting the UK financial services sector at the forefront of technology and innovation are;

  • Consulting, alongside the Bank of England, on a UK retail central bank digital currency “in the coming weeks”.
  • Publishing a response to the consultation on expanding the Investment Manager Exemption to include crypto assets.
  • 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.

Finally, delivering for consumers and business will involve;

  • consulting on reform of the Consumer Credit Act;
  • regulating in early 2023, to remove well-designed performance fees from the pensions regulatory charge cap;
  • working with the FCA to “examine the boundary between regulated financial advice and financial guidance”.