How is Britain using the Brexit to advance financial reform?

IS THIS A NEW BIG BANG?

Not quite, but it does signal a change in the regulatory landscape from years of tightening consumer protections and raising bank capital requirements to a focus on what changes are required to make the regulations function better for Britain after Brexit.

The measures, which were initially labeled a "Big Bang 2.0" on par with the extensive share trading reforms of the 1980s, have since been given the name "Edinburgh Reforms" in honor of the city where finance minister Jeremy Hunt made them official.

The administration has tempered its rhetoric, adamant that there won't be a "race to the bottom," significant deviation from international norms, or elimination of investor protections, but that authorities should promote the financial sector's global competitiveness.

Given the need to avoid "unlearning" lessons from the 2008 global financial crisis, Hunt stated it would be incorrect to refer to the reforms as a "Big Bang" and emphasized the independence of regulators.

"Deregulation is not something that the City supports. The announcements made today show that there is progression taking place rather than revolution, according to Alasdair Haynes, CEO of the Aquis stock market.

WHAT IS THE DEAL WITH RING-FENCING?

Britain is now focusing on banks after already announcing a relaxation of the capital requirements for insurers.

Since January 2019, banks have been required to ring-fence their deposit-taking divisions with a layer of capital to protect them from crises in their riskier business operations.

The requirements, according to banks, are overly rigid and prevent smaller institutions from competing with larger ones in the mortgage market. The administration said that it will modify the regulations in accordance with the findings of a review it had commissioned.

The government will have a consultation in the middle of 2023 regarding the exclusion of banks with minor investment banking activities from the regulations and the increase from 25 to 35 billion pounds in the deposit level required for ringfencing compliance.

DO BANKERS NOW OWE NOTHING?

The "lite-touch" of the pre-financial crisis is not returning.

A cap on banker bonuses set by the EU will be removed, as the government had already indicated, but other restrictions on incentive payments are expected to stand.

After few people were held accountable for the misbehavior that caused the global financial crisis and required taxpayers to bail out institutions, Britain implemented laws in 2016 holding senior bankers and insurers executives directly accountable for the decisions they make.

Although there haven't been many investigations or enforcement actions to date, it was believed that this would be a method for using "heads on sticks" to publicly shame bankers. Bankers complain that regulators take too long to approve senior postings.

In the first quarter of 2023, the government will examine this senior management and certification regime, although the scope of any modifications is still unknown.

WHERE DO MARKETS FALL?

Many reviews will be written as London tries to catch up to New York in listings.

The guidelines for short-selling, or bets that the price of a company will decline, are among the subjects being examined. The government wants to completely replace the investor-provided "PRIIPs" explanatory document from the EU era with an alternative structure.

An industry group will investigate whether it makes sense to cut the time it takes to settle a stock trade in half from two working days to one, a change that is already being considered in the United States.

Along with a revision of the securitization regulations, rules governing prospectuses that companies must provide to investors when they list on an exchange will also be updated.

By 2024, the government promises to establish regulations for a "consolidated tape" that will allow investors to compare the best deals available across trading platforms using market pricing.

The government will implement the suggestions made by a review of how listed companies might attract new investors and raise capital.

The EU has already partially reversed the "unbundling" law, which requires brokers to itemize fees for doing stock selection research and filling stock orders. In order to increase businesses' access to financing before going public, there will also be experiments for a wholesale market venue that runs on an irregular schedule.