IS THIS BIG BANG 2.0?
Not quite, but it does reflect a tilt in the regulatory pendulum from years of boosting bank capital requirements and enforcing consumer protections to considering what modifications are necessary to make rules function better for the United Kingdom after Brexit.
Initially touted as a Big Bang 2.0 on par with the extensive 1980s share trading reforms, the measures have been renamed the "Edinburgh Reforms" after the city in which they were formally introduced by finance minister Jeremy Hunt.
The administration has toned down its rhetoric, maintaining that there would be no "race to the bottom," significant departure from international norms, or elimination of investor protections, but that authorities should enhance the international competitiveness of the financial sector.
Given the need to avoid 'unlearning' lessons from the 2008 global financial crisis, Hunt stated that it would be incorrect to refer to the reforms as a Big Bang and emphasized the independence of regulators.
"The City opposes deregulatory measures. According to Alasdair Haynes, CEO of the Aquis stock market, "today's statements signal an evolution rather than a revolution."
WHAT'S RING-FENCING ALL ABOUT?
The United Kingdom has previously announced a relaxation of capital requirements for insurers and is now focusing on banks.
Since January 2019, banks have been required to protect their deposit-taking arms with a cushion of capital against the failure of their riskier operations.
The banks have argued that the regulations are too stringent and inhibit their ability to compete with larger lenders in the mortgage market. The government stated that it will alter the rules in accordance with the recommendations of a review it commissioned.
Midway through 2023, the government will consult on exempting banks without significant investment banking activities from the rules and raising the deposit level that triggers compliance with ringfencing regulations from 25 billion to 35 billion pounds.
ARE BANKERS NOW OFF THE HOOK?
There is no return to the pre-financial crisis "light touch."
The administration has already declared that it will remove the EU cap on banker bonuses, but other restrictions on bonus payment are set to stay.
After few individuals were penalized for misconduct that contributed to the global financial crisis when taxpayers bailed out lenders, Britain enacted laws in 2016 to hold senior bankers directly accountable for the decisions they make. In 2018, senior officials at insurers were added to this group.
It was expected that it would be used to publicly disgrace bankers by placing their "heads on sticks," but there have been few investigations or enforcement proceedings thus far. According to bankers, regulators also take too long to approve senior positions.
This senior management and certification regime will be reviewed by the government in the first quarter of 2023, with no indication as to the scope of potential modifications.
HOW ABOUT THE MARKETS?
As London attempts to catch up to New York in listings, there will be an influx of reviews.
Topics under consideration include short-selling regulations and stock-price-prediction wagers. The administration plans to completely eliminate the "PRIIPs" investment guide from the EU era and replace it with an alternative structure.
An industry group will assess the case for reducing the time it takes to settle a stock trade from two business days to one, a change that is already planned in the United States.
Rules governing the prospectuses that companies provide to investors when they list on an exchange will be revised, as will securitisation regulations.
The government agrees to implementing standards for a "consolidated tape" by 2024 so that investors can compare market prices across trading platforms.
The government will implement the findings of a review aimed at enhancing how publicly traded corporations solicit fresh capital from investors.
EU rules requiring brokers to itemize fees for stock choosing research and stock order execution, known as "unbundling," will be reviewed; the EU has already partially overturned this requirement. There will also be experiments for an intermittently operating wholesale market venue to boost companies' access to funding prior to their public listing.
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