# Explainer-How Britain is exploiting Brexit to reform finance?
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-12-09
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Britain's City of London reforms: The Edinburgh Reforms
Meta Description: The UK government unveils over 30 reforms to bolster London's global financial centre, amid stiff competition from Amsterdam, Paris, Frankfurt, New York,
URL: https://financedigest.com/explainer-how-britain-is-exploiting-brexit-to-reform-financehtml

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By Huw Jones

LONDON (Reuters) – Britain proposed over 30 reforms on Friday to bolster the City of London’s role as a global financial centre, now outside the European Union and facing competition from Amsterdam, Paris and Frankfurt, as well as New York and Singapore.

IS THIS BIG BANG 2.0?

Not quite, but it marks a swing in the regulatory pendulum from years of [increasing bank capital](https://www.financedigest.com/frances-ynsect-to-refocus-bug-business-after-capital-increase.html "France’s Ynsect to refocus bug business after capital increase") requirements and tightening consumer protections, to thinking what tweaks are needed to make rules work better for Britain after Brexit.

Initially trailed as a Big Bang 2.0 on the same scale as far-reaching 1980s reforms of share trading, the changes have now been dubbed the “Edinburgh Reforms” after the city where they were formally unveiled by [finance minister](https://www.financedigest.com/scottish-finance-minister-kate-forbes-to-run-for-countrys-leadership.html "Scottish finance minister Kate Forbes to run for country’s leadership") Jeremy Hunt.

The government has toned down its rhetoric, insisting there will be no ‘race to the bottom’, big departure from international norms, or scrapping investor protections, but that regulators should aid the [financial sector’s](https://www.financedigest.com/overcoming-information-overload-in-the-financial-sector.html "OVERCOMING INFORMATION OVERLOAD IN THE FINANCIAL SECTOR") international competitiveness.

Hunt said it would be wrong call the reforms a Big Bang given the need to avoid ‘unlearning’ lessons from the 2008 global [financial crisis](https://www.financedigest.com/biggest-uk-house-price-fall-recorded-since-financial-crisis.html "Biggest UK house price fall recorded since financial crisis") and underscored the independence of regulators.

“The City does not want to see deregulation. Today’s announcements are an indication of an evolution, rather than revolution,” said Alasdair Haynes, CEO of Aquis stock exchange.

WHAT’S RING-FENCING ALL ABOUT?

[Britain has already announced an easing of capital rules for insurers and is now turning](https://www.financedigest.com/2043-the-year-britain-will-turn-cashless.html "2043: The year Britain will turn cashless") to banks.

Since January 2019 [banks have had to ring-fence their deposit-taking arms](https://www.financedigest.com/hsbc-acquires-british-arm-of-stricken-silicon-valley-bank.html "HSBC acquires British arm of stricken Silicon Valley Bank") with a cushion of capital to insulate them against blow-ups in their riskier activities.

[Banks have complained the rules are too strict and hinder smaller ones from competing with bigger lenders in the mortgage](https://www.financedigest.com/britain-urges-banks-to-offer-mortgage-flexibility-in-cost-of-living-crisis.html "Britain urges banks to offer mortgage flexibility in cost-of-living crisis") market. The [government said it will follow recommendations from a review it commissioned and amend the rules](https://www.financedigest.com/italys-rightist-government-tightens-rules-for-migrant-rescues.html "Italy’s rightist government tightens rules for migrant rescues").

The government will consult mid-2023 on exempting banks without major investment banking activities from the rules, and on raising the deposits threshold which triggers [compliance with ringfencing rules](https://www.financedigest.com/britain-plans-new-data-rules-to-ease-compliance-burden.html "Britain plans new data rules to ease compliance burden"), from 25 billion pounds to 35 billion pounds.

ARE BANKERS NOW OFF THE HOOK?

It’s not back to pre-financial crisis ‘lite-touch.

The government had already announced it will scrap an EU cap on [banker bonuses](https://www.financedigest.com/banker-bonuses-go-from-boom-to-bust-in-jarring-reversal.html "Banker bonuses go from boom to bust in jarring reversal"), though other curbs on how bonuses are paid are expected to remain.

Britain introduced rules in 2016 to make senior bankers, adding senior officials at insurers in 2018, directly accountable for the decisions they take after few individuals were punished for misconduct that led to the [global financial](https://www.financedigest.com/the-feds-rate-hike-that-wasnt-and-brexit-a-snapshot-of-global-financial-markets.html "The Fed’s rate hike that wasn’t and Brexit: a snapshot of global financial markets") crisis when taxpayers bailed out lenders.

It was [feared as a tool to publicly shame bankers by putting “heads](https://www.financedigest.com/oil-prices-head-for-fourth-weekly-drop-as-demand-fears-weigh.html "Oil prices head for fourth weekly drop as demand fears weigh") on sticks”, but so far there have been few investigations or enforcement cases. [Bankers say regulators also take too long to give the green light to senior](https://www.financedigest.com/financial-risks-of-climate-change-overplayed-senior-hsbc-banker-says.html "Financial risks of climate change overplayed, senior HSBC banker says") appointments.

The government will review this [senior managers and certification regime](https://www.financedigest.com/senior-managers-regime-what-does-it-mean-for-the-industry.html "SENIOR MANAGERS REGIME – WHAT DOES IT MEAN FOR THE INDUSTRY?") in the first quarter of 2023, with no indication yet of the scale of any changes.

WHAT ABOUT MARKETS?

There will be a raft of reviews as [London seeks to catch up with New York in listings](https://www.financedigest.com/oneweb-eutelsat-set-for-secondary-london-listing-the-times.html "OneWeb-Eutelsat set for secondary London listing – The Times").

Topics under review include the rules on short-selling, or bets that the [price of stock will fall](https://www.financedigest.com/uk-house-prices-stabilise-after-four-month-fall-halifax-says.html "UK house prices stabilise after four-month fall, Halifax says"). The [government proposes](https://www.financedigest.com/carrefour-unveils-30-euro-shopping-basket-in-spain-after-government-price-cut-proposal.html "Carrefour unveils 30 euro shopping basket in Spain after government price cut proposal") to scrap outright an EU-era “PRIIPs” explanatory document given to investors, replacing it with an alternative framework.

There will be an [industry taskforce to examine the case for halving the time it takes to settle a stock trade](https://www.financedigest.com/eu-recovers-appetite-for-trade-in-green-industry-push.html "EU recovers appetite for trade in green industry push") from two working days to one, a move already planned in the United States.

Rules on prospectuses that companies give to investors when they [list on an exchange](https://www.financedigest.com/verasity-vra-lists-on-tier-1-cryptocurrency-exchange-crypto-com.html "Verasity $VRA Lists on Tier-1 Cryptocurrency Exchange Crypto.com") will be overhauled, along with a reform of rules for securitisation.

The government commits to putting in place rules for a “consolidated tape” by 2024, to [provide market prices for investors to check on best deals across trading platforms](https://www.financedigest.com/newly-launched-quintessential-to-provide-prestige-living-management-platform-for-prs.html "Newly launched Quintessential to provide ‘prestige living’ management platform for PRS").

The government will act on recommendations from a review into improving how [listed companies tap investors](https://www.financedigest.com/volkswagen-investors-question-plan-for-ceo-to-lead-porsche-listing.html "Volkswagen investors question plan for CEO to lead Porsche listing") for fresh funds.

There will be a review of EU rules which require brokers to itemise fees for stock picking [research](https://www.financedigest.com/3-essential-types-of-stock-research-tools.html "3 Essential Types of Stock Research Tools") and executing stock orders, known as ‘unbundling’ – a rule the EU has already partially reversed. There will also be trials for a wholesale market venue that operates on an intermittent basis to [improve companies’ access](https://www.financedigest.com/what-needs-to-happen-to-improve-the-landscape-for-smes-trying-to-access-finance-options-in-the-uk.html "What needs to happen to improve the landscape for SMEs trying to access finance options in the UK") to capital before they publicly list.

AND [GREEN FINANCE](https://www.financedigest.com/how-is-green-finance-reshaping-the-banking-industry.html "How is green finance reshaping the banking industry?")?

The government will consult on bringing environmental, social and governance (ESG) company [ratings providers under the regulatory net](https://www.financedigest.com/ecb-weighs-bigger-rate-hike-with-safety-net-for-indebted-countries.html "ECB weighs bigger rate hike with safety net for indebted countries").

The [ratings are widely used by investors](https://www.financedigest.com/uk-stocks-slip-as-rate-hike-worries-grip-investors.html "UK stocks slip as rate hike worries grip investors") for picking companies which tout ‘green’ credentials, but they are not regulated. The Financial Conduct Authority said it would encourage regulation focused on transparency, good governance, management of conflicts of interest, and [robust systems and controls](https://www.financedigest.com/dollar-buoyant-as-robust-u-s-data-keep-fed-hawks-in-control.html "Dollar buoyant as robust U.S. data keep Fed hawks in control").

WILL THERE BE A BRITCOIN?

Prime Minister Rishi Sunak, when he was finance minister, called for a “Britcoin” or [digital pound for faster payments](https://www.financedigest.com/italys-nexi-signs-digital-payments-deal-with-tims-olivetti.html "Italy’s Nexi signs digital payments deal with TIM’s Olivetti").

The government will consult with the [Bank of England in coming weeks on a digital pound for retail](https://www.financedigest.com/uk-retail-banks-is-irrelevance-curtailing-opportunity.html "UK Retail Banks: Is Irrelevance Curtailing Opportunity?") use.

(Reporting by Huw Jones;Editing by Elaine Hardcastle)


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