UK sets out post-Brexit finance plan to spur City of London

The UK government has set out a package of more than 30 post-Brexit reforms to boost the country’s financial services industry, with changes including relaxing ring-fencing capital rules to lighten the burden on smaller banks.

As part of the changes to ring-fencing – which requires banking groups to separate their retail banking services from their investment and international banking activities – UK chancellor Jeremy Hunt said the Treasury will consult on raising the threshold at which the ring-fencing regime applies to £35 billion (€40.5 billion) of retail deposits, up 10 billion.

The UK also said it would look to replace EU-era rules around the regulation of short selling. The new stand-alone regime will be “tailored to the needs of UK markets, companies and investors”, according to a Treasury document.

“Leaving the EU gives us a golden opportunity,” Mr Hunt said in a statement, announcing the measures. “We are delivering an agile, proportionate and home-grown regulatory regime which will unlock investment across our economy.”

Toned Down

The British government is trying to take advantage of regulatory opportunities from Brexit, seeking to change rules to free up capital markets and attract business to the City of London. However, Prime Minister Rishi Sunak has toned down the scope of his financial services reforms compared to the plans of his predecessor Liz Truss.

Dubbed the Edinburgh Reforms,’ Mr Hunt’s package also includes plans to replace swathes of EU regulation covering areas such as disclosure for financial products, according to the Treasury. The government also said it will overhaul “overbearing EU rules which put companies off listing in the UK. Mr Hunt is set to meet banking CEOs in Edinburgh on Friday.

“This is not about deregulation,” Chris Hayward, policy chairman for the City of London, said on Bloomberg Television, noting the changes are much more marginal compared to the Big Bang in the 1980s. “The plans are designed to make sure make sure our regulation is proportionate to driving growth.”

Other reforms announced include giving financial regulators a formal secondary objective to promote growth and the sector’s international competitiveness; plans to repeal EU-era solvency rules to allow insurers to invest in UK infrastructure; and an overhaul of the prospectus regime to make it more attractive for companies to list in London.

The government’s recent attempts to change City rules have at times stoked controversy, such as a proposed new intervention power over regulators which was dropped by City minister Andrew Griffith. The more limited scope of the Edinburgh Reforms’ is a sign of the leading role the UK played in designing much of the EU’s financial services regulations, meaning there is little scope for immediate change. – Bloomberg