London: The UK government on Friday unveiled a major reform of the country's financial services sector as a post-Brexit policy initiative to ease some of the banking rules put in place in the wake of the 2008 financial crisis and help turbocharge growth.
The government also announced that the ring-fencing regime will be reformed in response to the recommendations of the Skeoch Review, including by freeing retail focussed banks from the regime, easing unnecessary regulatory burdens on firms while maintaining protections for depositors.
The ring-fencing regime was introduced in the aftermath of the 2008 financial crisis to strengthen the resilience of the UK banking sector. This regime separates core retail banking from investment banking activities, with the aim of protecting depositors from risks arising elsewhere in the banks and the financial system.
Skeoch Review refers to an independent panel appointed by the UK Treasury under the chairmanship of businessman Keith Skeoch to review the operation of the ring-fencing regime as well as banks' proprietary trading activities. The UK government said the Edinburgh reforms package will help turbocharge growth and deliver a smarter and home-grown regulatory framework for the United Kingdom that is both "agile and proportionate".
UK Chancellor Jeremy Hunt set out plans to repeal" and "replace hundreds of pages of burdensome European Union (EU) retained laws governing financial services. We are committed to securing the UK's status as one of the most open, dynamic and competitive financial services hubs in the world, he said while addressing an industry roundtable in Edinburgh.
The Edinburgh Reforms seize on our Brexit freedoms to deliver an agile and home-grown regulatory regime that works in the interest of British people and our businesses. And we will go further delivering reform of burdensome EU laws that choke off growth in other industries such as digital technology and life sciences, he said.
The reform plans aim to make substantial legislative progress over the course of 2023 on repealing and replacing EU-era Solvency II - the rules governing insurers' balance sheets which are expected to unlock over GBP 100 billion of private investment for productive assets such as UK infrastructure.
The chancellor also issued new remit letters to the Financial Conduct Authority and Prudential Regulation Authority, emphasising the new secondary competitiveness objectives. He said regulators will have a duty to facilitate, subject to aligning with relevant international standards, the international competitiveness of the UK economy and its growth in the medium to long term.
The 'Edinburgh Reforms' ensure that the UK's financial markets are among the most open and attractive in the world, the UK Treasury Department said.
It added that the financial services sector is vital for Britain's economic strength, contributing GBP 216 billion a year to the UK economy. This includes GBO 76 billion in tax revenue, enough to fund the entire police force and state school system, while employing over 2.3 million people, with 1.4 million outside London.
Economic Secretary to the Treasury, Andrew Griffith said, The UK is a financial services superpower and we have long benefited from, and are committed to, high quality regulatory standards.
Scotland's role in maintaining our status as the global benchmark for regulation is crucial, with Edinburgh and Glasgow the two largest UK hubs outside of London. Our reforms deliver smarter regulation of financial services that will unlock growth and opportunity in towns and cities across the UK," he said.
The government said the work to repeal, and where appropriate replace, retained EU law governing the sector has been guided by industry and split into two initial tranches. These will focus on delivering reform to areas which provide the most significant boost to UK growth and competitiveness. However, the opposition Labour Party criticised some of the plans, saying lessons of the financial crisis are being overlooked. (PTI)
