Jeremy Hunt Unveils ’Next Chapter’ For UK Financial Services

December 13, 2022
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Chancellor of the Exchequer Jeremy Hunt has laid out the "Edinburgh Reforms", a list of more than 30 regulatory reforms aimed to "unlock investment" and "turbocharge" growth in the UK.

Chancellor of the Exchequer Jeremy Hunt has laid out the "Edinburgh Reforms", a list of more than 30 regulatory reforms aimed to "unlock investment" and "turbocharge" growth in the UK.

The reforms intend to deliver a “smarter and home-grown” regulatory framework for the UK and a timeline for getting rid of pieces of “retained EU law” that are burdensome. This will enable the country to seize the benefits of Brexit, according to the announcement.

The chancellor wants to cut the EU “red tape” and free the UK’s financial services from “hundreds of pages of burdensome EU retained laws”, which will be replaced by a regulatory framework that is “agile, less costly and more responsive to emerging trends”, he said.

“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,” Hunt commented.

“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 added.

One of the most widely discussed elements of the overhaul is the government’s plans to reform the ring-fencing regime, which is intended to protect customer deposits by separating retail banking from riskier investment banking operations.

The bank ring-fencing regime was part of the government’s response to the global financial crisis and came into force in 2019.

Hunt spoke up for the proposal during a Financial Times webinar on Friday (December 9), saying that the reforms will “not unlearn” the lessons of 2008.

He insisted that banks today “have much stronger balance sheets, and we have a much stronger resolution system if things do go wrong”, the Guardian cited the chancellor as saying.

The government now plans to ease unnecessary regulatory burdens on firms, which include freeing retail-focused banks from the regime.

According to the release, these changes are in line with the recommendations of the Skeoch Review, which concluded that the ring-fencing regime is worth retaining but several changes could be done to improve it.

The chancellor has also issued new remit letters to the Financial Conduct Authority (FCA) and Prudential Regulation Authority emphasising the new secondary competitiveness objectives.

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 government has also published the first consultation on proposals to modernise the Consumer Credit Act. The consultation aims to simplify the regime to encourage innovation and cut costs for consumers and businesses.

One of the considerations would move much of the existing act from statute to sit under the FCA, allowing the regulator to respond more quickly to emerging developments in the consumer credit market.

Additionally, the government is planning to open a consultation on a UK retail central bank digital currency (CBDC) in the coming weeks and launch a review into reforming the Senior Managers & Certification Regime in the first quarter of 2023.

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