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London’s failure to secure a primary listing this year for its biggest technology firm, chip designer ARM Ltd, was seen by the Conservative government as a wake-up call. It wants to change rules for stock offerings, private trading venues and other areas to give London an edge over rival financial centres. It also eases capital requirements for insurers, freeing up billions of pounds that can be invested in national infrastructure. Some of the regulations imposed on banks after the 2008 global financial crisis may also be dismantled.
In preparation for Brexit, EU laws were incorporated into British law with the aim of amending them at a later date. That process began in July, when Prime Minister Boris Johnson’s administration introduced a parliamentary bill laying out a new legal framework for banks, insurers and asset managers. The bill is expected to become law in April or May 2023. Meanwhile, financial firms and their lobbyists seek to influence the shape of reform.
3. What will the final adjustments look like?
It is not set in stone. When Johnson stepped down in September, his successor Liz Truss tried to press ahead with reforms by scrapping EU-era caps on banker bonuses and allowing ministers to block or change decisions by the country’s financial regulators, the Financial Conduct Authority and the Bank of England. Prudential Regulation Authority of England. Truss was ousted after just six weeks in office when her radical tax-cutting plans sparked a bond crisis. His successor, Rishi Sunak, supported the amendment on bonuses. But he scrapped the idea of intervention powers over the FCA and the PRA. Regulators lobbied hard against the measure, saying any erosion of their independence would damage their credibility.
4. Do financial firms like reforms?
They have welcomed some of them while lobbying for other changes. Banks, for example, want to scale back the ring-fencing of retail and investment banking. Smaller lenders may want to reduce the amount of loss-absorbing capital they are required to hold. But the city’s wider appetite for a bonfire of EU-era regulations waned during Truss’s brief but chaotic tenure. Some senior bankers are urging Sunac’s government to take a more gradual approach because sudden and wholesale changes to the rules under which they operate could sow further chaos in markets and pile more compliance work on businesses as they enter the UK economy. is Financial crisis.
The impact of the changes will help determine the success of the wider Brexit project. Critics say that, far from making Britain a more nimble trading nation, it has hurt the economy by burdening businesses with extra paperwork. UK financial firms have lost automatic access to the bloc’s markets, and banks have had to relocate some staff and activities within the EU to maintain business there. Britain’s EU counterparts are concerned about maintaining a regulatory “level playing field”, seeing the UK as too close and important a partner to allow for a complete disarray of standards around business, taxation and the environment. There is a risk that the financial reforms will provoke the EU to restrict the UK’s access to its markets in areas such as derivatives trading. Another concern is that if the measures go too far, they could undermine the stability and transparency that underpin the city’s appeal to international investors.
More stories like this one are available at bloomberg.com
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