Britain overhauls financial rules to bolster City's global influence

Britain overhauls financial rules to bolster City’s global influence

  • Britain says high standards will be maintained
  • UK flags criticism in financial crisis-era reforms
  • London faces new competition from EU centers
  • Consultation on the planned digital book

LONDON, Dec 9 (Reuters) – Britain presented a series of measures on Friday to bolster the City of London’s role as a global financial hub, under pressure since Brexit ushered in new competition from Amsterdam , Paris and Frankfurt.

Planned reforms also include an overhaul of rules put in place in the wake of the financial crisis more than a decade ago to make bankers accountable for their decisions and a relaxation of capital requirements for small lenders, after much pressure. from the banks.

Finance Minister Jeremy Hunt said it would be wrong to describe the 30 measures as a ‘Big Bang’ – a reference to stock market deregulation in the 1980s – which will destroy tougher rules introduced after the crisis global finance.

“We have to make sure we don’t unlearn the lessons of 2008, but at the same time recognize that banks now have much stronger balance sheets,” he told an event organized by the FT.

The city has been largely cut off from the European Union by Brexit, prompting the government to loosen rules as Amsterdam overtook London to become Europe’s top stock trading hub, adding to the competition from New York and Singapore.

Leaving the European Union allows Britain to write its own rules, but as it is home to dozens of international banks, it has little room to radically deviate from international standards.

“The government’s approach to reforming the financial services regulatory landscape recognizes and protects the foundations on which the UK’s success as a financial services hub is built: agility, consistently high regulatory standards and openness,” said the Ministry of Finance in a press release.

Hunt outlined his plans at a meeting with finance industry officials in Edinburgh.

Now dubbed the ‘Edinburgh reforms’, the proposed reset had been dubbed ‘Big Bang 2.0’, raising expectations of a big deregulation push that left banks fearful of costly systems changes.

But the focus has been on reviewing and adjusting the rules while staying aligned with global standards, rather than a wholesale dismantling of regulations.

The package of planned reforms includes a review of securitization and short selling rules, an overhaul of the prospectuses issued by companies when they are listed and a plan to repeal and reform the rules which were introduced when Britain was in the EU.

Other plans include a consultation in the coming weeks on a central bank digital currency, a project Prime Minister Rishi Sunak was close to his heart as finance minister.

There will also be a consultation on the regulation of compilers of corporate environmental, social and governance (ESG) impact ratings.

“It’s important that people don’t exaggerate this – there’s no sense of going back to a pre-financial crisis world,” said Jonathan Herbst, attorney at Norton Rose Fulbright.

The EU is updating its own financial rules to reduce remaining reliance on London and is ahead in areas such as crypto-assets.


The reforms target two sets of rules introduced by Britain in the aftermath of the financial crisis more than a decade ago, when the government had to bail out undercapitalized banks while few individual bankers were punished.

The first set, known as the Senior Management and Certification Regime (SMCR), requires banks and insurers to appoint people responsible for specific activities, making it easier for regulators to sanction them if something goes wrong. .

Bankers have complained that regulators are taking too long to vet these high profile appointments.

The second set of rules requires banks to “fence” their retail branches with a capital cushion to protect deposits from a boom in riskier activities, such as derivatives trading.

The ring-fencing regime will be reformed to free up retail-focused banks and ease “unnecessary regulatory burdens on businesses while maintaining depositor protection.”

Banks have lobbied to scrap the rule or dramatically increase the deposit threshold that triggers the requirement. The changes are likely to ease the burdens on smaller banks to help Britain’s longstanding attempts to increase competition in a sector dominated by HSBC, Barclays, Lloyds and NatWest.

Bank of England Deputy Governor Sam Woods said in 2020 that he would defend the fence rules until his “last drop of blood”. The BoE said on Friday it would work with the ministry to ensure a safe and competitive financial system.

The department will also review European-era stock and bond trading requirements known as MiFID II, in particular a rule requiring brokers to itemize or “unbundle” their clients’ fees for research on stock selections and for the execution of stock orders.

Britain had already introduced initial reforms in its Financial Services and Markets Bill pending approval in parliament. This includes giving regulators an added goal of considering the city’s global competitiveness when writing rules.

Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown, said London’s financial center had been severely hampered since Brexit. “Unfortunately the allure just isn’t there, with many of the UK’s brightest companies being taken over by overseas investors, and London losing its status as a major shareholder,” she said. declared.

Other reforms already announced include removing a cap on bankers’ bonuses and relaxing capital rules for insurers. A public consultation on the regulation of crypto assets was also reported.

Reporting by Huw Jones, writing by William James; Editing by Kate Holton, Elaine Hardcastle and Louise Heavens

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