We have been a bit sceptical in the past that this was more about tinkering around the edges than substantive reform, however taken together there is quite a lot going on in the Edinburgh Reforms announced last week. Perhaps enough wood has been lobbed on the fire to start to make a difference.

There is a lot to unpick in the announcements – the press release heralded ‘over 30 reforms’ (we counted 31 to be precise, table below), and there were 13 separate links to disclosures, consultations or revised policy documents. Should also be said that not all of this is new news... this is a continuation of measures first set out in Rishi Sunak’s Mansion House speech in July last year.

There has been a fair amount in the press around the extent to which this will unlock growth, whether it is really a result of ‘Brexit freedoms’ and whether this is in fact a ‘race to the bottom’ in terms of regulatory oversight. The buzzwords from HM Treasury (HMT) are ‘agile’ and ‘proportionate’.

What seems clear is that while the EU is continuing with more rules-based regulation, the UK is moving increasingly towards principles-based in an effort to simplify. Of course most financial institutions operate in a global environment. A revision of the rules in one place does not necessarily simplify things if an organisation needs to follow different rules in different places.

Full details of the measures announced are on the HMT website.

A quick summary of some of the key points

  • Ring-fencing: HMT will consult in mid-2023 on near-term changes to the ring-fencing regime to make it more flexible, as well as longer-term reforms which would align it with the resolution regime, potentially allowing banks to be excluded from ring-fencing requirements if they are deemed to be resolvable. 
  • Future Regulatory Framework and Retained EU Law: HMT published a policy statement setting out how the “Comprehensive FSMA Model”[1] being implemented through the Financial Services & Markets (FSM) Bill will influence the repeal of Retained EU Law (REUL).
  • Consumer Credit Act reform: HMT is consulting on plans to modernise the regulatory framework for consumer credit. 
  • Various other initiatives announced including:
    • Overhauling the UK’s regulation of prospectuses
    • Reforming the Securitisation Regulation
    • Repealing the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation
    • Repealing EU legislation on the European Long-Term Investment Fund (ELTIF)
    • Consulting on certain requirements set out in the Payment Accounts Regulations 2015
    • Bringing forward secondary legislation to implement Wholesale Markets Review reforms
    • Commencing a review into reforming the Senior Managers & Certification Regime in Q1 2023
    • Committing to having a regime for a UK consolidated tape in place by 2024
  • Sustainable Finance: the government will publish an updated sustainable finance strategy in early 2023, including a consultation on bringing ESG rating providers into the regulatory perimeter.
  • Crypto: HMT and the Bank of England will issue a joint consultation on a UK retail central bank digital currency (CBDC). HMT will also publish a response to the consultation on expanding the Investment Manager Exemption to include cryptoassets. 

So lots in there to mull over, and yes perhaps building to more of a fire!

Look out for our ‘Year Ahead’ regulatory note in early January, and in the meantime have a good Christmas when it comes. 

Follow this link for a full list of the 31 Edinburgh Reforms (PDF).

[1] FSMA - Financial Services and Markets Act 2000

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