The Government is pressing ahead with a significant shake up in financial services regulation.
It wasn’t called Big Bang 2 after all but the Edinburgh reforms. It contains a quite remarkable number of reforms designed to increase the competitiveness of UK financial services with around 30 measures planned.
The changes are reviewed and summarised by law firm Herbert Smith Freemans in the neatly titled What you need to know about the Edinburgh Reforms.
Some of the reforms will be brought into force through current legislation. Others are arguably more of a plan for future changes.
FTAdviser considers what it means for advisers though arguably we will have to a little longer to understand the full implications especially potential changes in the culture of the regulator.
Among other changes, the Chancellor is axing the packaged retail and insurance-based investment products regulation (PRIPPS). Key information documents would no longer be required to include detailed performance scenarios.
There will be amendments to MiFID II. The senior managers regime will also be reviewed and it is possibly that this eventually proves controversial.
There will also adjustments to the bank ringfencing regime.
The Government will consult on the banking reforms in mid-2023 with a view to bringing forward secondary legislation later in 2023. It will include increasing the threshold for the ring-fencing regime from £25 billion to £35 billion retail deposits and taking banking groups without major investment banking operations out of the regime.
Regulators will also be given a new “secondary objective” including a greater focus on growth and international competitiveness while maintaining their existing primary objectives.
With this in mind, the government has laid before Parliament new remit letters for the FCA and the PRA which set targeted recommendations for how the regulators should have regard to the government’s economic policy.
What is interesting is that there may not be any noticeable immediate impact on advisers beyond some shifts in disclosure. The Consumer Duty will, for example, likely have a much greater impact.
However, while the reforms have been welcomed by pretty much every trade body and association, there are concerns being raised by former regulators including key figures such as the financial crisis era FSA Chair Adair Turner and the person who designed the ringfencing regime Sir John Vickers as the FT reports.
I may be that the arguments are really only starting.