Britain’s finance ministry has announced plans to reform the financial industry, which include a review and revision of regulations to hold bankers responsible for decisions, as well as easing capital requirements for small lenders.
Brexit has largely isolated the City from the European Union, which is putting pressure upon the government to relax rules so that Amsterdam surpasses London and becomes Europe’s leading share trading center.
The finance ministry released a statement saying that the government’s reform of the financial regulatory landscape “recognizes and protects what is the basis for the UK’s success in financial services as a hub: agility, consistent high regulatory standards and openness.”
The “Edinburgh Reforms” are now being called. The proposal reset was previously known as the “Big Bang 2.0”, a reference the 1980s overhaul of share trading. It raised expectations for a major deregulatory push that would leave banks afraid of costly system changes.
Instead of a wholesale deconstruction of existing regulations, the emphasis now shifts to revising and tweaking current rules in accordance with international norms.
A review of short selling rules and overhauling prospectuses that companies issue when they list are some of the reforms included in this group. There is also a plan to repeal and reform rules which were implemented when Britain was part of the EU.
Two sets of British rules were introduced in the wake of the financial crisis a decade ago. They require that the government bail out banks with low capitalisation, while bankers are not punished.
First, the senior management and certification regime (SMCR) requires that banks and insurance companies identify each individual responsible for risk management activities. This makes it simpler for regulators and allows them to penalize individuals when they go wrong.
The regulators are slow to approve senior appointments, according to bankers.
Second, banks must “ring fence” their retail branches with capital in order to protect deposits against losses from riskier activities such as derivative trading.
To free retailers-focused banks, to reduce regulatory burdens and protect depositors while maintaining the protections of depositors, the ring-fencing system will be reformated.
The rule was scrapped by banks, while the deposit threshold that triggers it has been significantly increased. These changes will likely ease the burdens of smaller banks in Britain to support Britain’s ongoing efforts to improve competition in a sector dominated HSBC and Barclays as well as Lloyds, NatWest, and Lloyds.
Because there is no international standard to which we can diverge, it’s possible for bankers and ring fencing reform to be more radical.
Also, the ministry will review EU-era bond and stock trading regulations known as MiFID II. This includes a rule that requires brokers to “unbundle”, or itemise their customer fees for stock research and stock order execution.
Britain has already made initial changes to its bill on financial services and markets, which was approved by parliament.
They included the removal of a cap for banker bonuses, and loosening capital rules to assist insurers. Also, a public consultation was held on the regulation of crypto assets.