To what extent is Britain taking advantage of Brexit to overhaul the financial sector?

ARE WE Experiencing a Big Bang 2.0?

Although not quite, it does signal a shift in regulatory priorities away from years of strengthening consumer protections and increasing bank capital requirements and toward consideration of how to best tailor regulations to Britain in the wake of Brexit.

After being teased as a Big Bang 2.0 on the scale of the sweeping 1980s reforms of share trading, Finance Minister Jeremy Hunt formally presented the measures in Edinburgh, where they have been called the "Edinburgh Reforms" after the city.

The government has softened its stance, saying instead that there will be no 'race to the bottom,' no major departure from international norms, and no elimination of investor protections, but that authorities should help the financial sector become more globally competitive.

Given the importance of not 'unlearning' the lessons of the 2008 global financial crisis, Hunt argued that it was incorrect to refer to the reforms as a "Big Bang" and stressed the importance of regulators' autonomy.

The city council is opposed to deregulation. Rather than a revolution, the developments announced today point toward progression, according to Aquis Stock Exchange CEO Alasdair Haynes.

SO, WHAT IS THIS THING CALLED RING-FENCING?

To follow up on its announcement to relax capital limits for insurers, Britain is now focusing on banking institutions.

Banks have been required to buffer their deposit-taking operations with capital to prevent losses from their riskier operations as of January 1, 2019.

Some financial institutions have voiced concerns that the restrictions are overly restrictive, making it difficult for them to compete with larger lenders in the mortgage market. Following the findings of a review it commissioned, the government has said it will modify the regulations.

During the consultation period in the middle of 2023, the government will consider raising the deposit threshold that triggers compliance with ringfencing laws from 25 billion pounds to 35 billion pounds and exempting banks without large investment banking activity from the rules.

ARE BANKERS SAFE TO WORK AGAIN?

This is hardly a return to the "light touch" of the years before the financial crisis.

While some restrictions on bonus payments are likely to remain in place, the administration has already stated that it will abolish an EU cap on banker incentives.

After the global financial crisis, when taxpayers bailed out institutions, Britain enacted regulations to hold senior bankers directly accountable for the decisions they make. In 2018, the same restrictions were extended to senior officials at insurance companies.

Some worried it would be used to "put heads on sticks" and disgrace bad bankers, but thus far there have been few investigations or incidents of enforcement. Bankers also claim that it takes regulators too long to approve senior postings.

There has been no word on the scope of the government's evaluation of this senior management and certification regime, scheduled for the first quarter of 2023.

WHERE DO WE STAND WITH MARKETS?

London hopes to overtake New York in listings, so expect a deluge of reviews.

The regulations governing short sales, or bets on a decrease in the price of a stock, are one of the many issues being examined. The administration has proposed doing away with the PRIIPs investor guide, which dates back to the European Union (EU), and replacing it with a new system.

In the United States, a reduction from two business days to one is already in the works, and an industry taskforce will investigate the pros and cons of this change.

Regulation of securitization and the prospectuses that companies must provide to investors before listing on an exchange will be modified.

By 2024, the government promises to have standards in place for a "consolidated tape," which will give market pricing for investors to compare different trading platforms' best deals.

The findings of a study into how to better help publicly traded companies raise new capital from investors will be implemented.

Brokers' "unbundling" of fees for stock selecting research and stock order execution is being reviewed, as is the EU's partial reversal of this rule. An intermittent wholesale market venue will also be tested in an effort to increase companies' access to funding prior to going public.