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At the end of last week, a UK landmark bill aimed at overhauling the country’s financial services rules received royal assent.
The UK Financial Services and Markets Bill became law on Thursday (June 29) following its royal assent.
The act is considered to be key to the government’s vision to grow the economy and create an open, sustainable and technologically advanced financial services sector.
The legislation was designed with the aim of increasing the country’s international competitiveness following Brexit by cutting and adjusting existing EU rules to turn the UK into a global financial centre.
It updates existing rules or creates new ones on a wide range of topics from authorised push payment (APP) scams to access to cash, crypto and others.
It also gives more powers to the financial services regulators to address issues that have so far fallen outside their regulatory scope, while increasing their accountability and transparent oversight.
Andrew Griffith, economic secretary to the Treasury, said the act “gives us control of our financial services rulebook, so it supports UK businesses and consumers and drives growth”.
“2023 is proving to be a banner year for reforming our financial services.”
“By repealing old EU laws set in Brussels it will unlock billions in investment — cash that can unlock innovation and grow the economy.”
Most important changes for payment firms
The new law gives the Payment Systems Regulator (PSR) the long-awaited authority to impose APP scam reimbursement requirements on Faster Payments participants.
As reported by VIXIO, APP fraud has skyrocketed during the pandemic with losses totalling £485.2m in 2022.
Although the PSR until now did not have the authority to impose requirements on market participants until the law was passed, it has been working to tackle the issue.
In early June, the regulator published a policy statement in preparation for the upcoming legislation, which shows the agency’s intention to impose a 50:50 split liability on sending and receiving payment firms.
PSR managing director Chris Hemsley welcomed the passage of the bill saying that it will allow his agency to make “essential changes that will see increased protections for people against the threat of APP scams”.
The regulator has two months, starting from the date of the royal assent, to publish a draft reimbursement rule.
Access to cash
The new law also includes legislation to protect access to cash after the use of physical money dropped from 55 percent in 2011 to only 17 percent of all payments in 2021.
Against the backdrop of closing bank branches and a shrinking ATM network, the Financial Conduct Authority (FCA) was facing criticism that its actions had come too late and now the struggle to cope in a cashless society disproportionately falls on the elderly, people with lower income and those with physical or mental health difficulties.
However, part of the problem was that although several regulators had an impact on certain aspects to preserve access to cash, none of them had explicit power to lead those efforts.
The Financial Services and Markets Bill now names the FCA as the leading regulator for retail cash access and was given powers for ensuring that designated firms allow people to deposit and withdraw money across the UK.
Changes related to the FCA
The act introduces a number of changes that have an impact on how the FCA operates.
One part of the legislation assigns to the FCA a new secondary objective for competitiveness and growth, adding to its existing operational objectives to protect consumers, enhance market integrity and promote competition.
This measure aims to address criticism of the FCA that the regulator has been overly cautious lately.
David Postings, chief executive of UK Finance, said it is delighted that the Financial Services and Markets Bill has been granted royal assent.
Postings told VIXIO that UK Finance particularly welcomes the new secondary growth and competitiveness objective, “which will send a clear signal that the UK is open for business”.
“This will help give businesses the confidence to invest for the future and support higher levels of economic growth that benefits all of us.”
The FCA has also been given new powers to make rules in areas that so far fell outside its scope, including for new financial markets and products designated by the Treasury, while also increasing the accountability of the regulator.
Crypto regulation
For the first time, the legislation recognises stablecoins and crypto-assets as regulated financial activities in the UK and brings them within the scope of UK regulation.
The move has been widely welcomed by the crypto community.
“The passing of this transformational piece of legislation into law is a big step forward towards the UK becoming a global hub for crypto and digital assets,” Su Carpenter, director of operations at industry association CryptoUK, said.
It is a “significant step in terms of providing the necessary regulatory clarity and business certainty for firms to invest here in the UK”, Carpenter added.
Economic secretary Griffith has indicated that rulemaking is a priority and could be introduced within 12 months.
The bill also lays the groundwork for advancing the use of blockchain in financial markets by establishing sandboxes for new technologies.
