UK Treasury outlines timeline for financial services reforms

Among the statutory instruments anticipated to be laid before the end of 2023 are UK reforms to the ‘Solvency II’ regime, which regulates the insurance industry and outlines the amount of capital that insurance firms must hold to reduce the risk of their financial collapse. Legislation to repeal further EU-derived insurance rules concerning how insurance products are sold is also to be laid within the next five and a half months.

The Treasury also expects to legislate by year end to replace the Securitisation Regulation with “a more agile regulatory framework” for securitisation that will legislate for the reforms identified by an earlier government review of the EU-derived regime.

The Prospectus Regulation is also to be replaced by a “simpler, more agile, and more effective” regime, creating “an entirely new framework for offers of securities to the public and admissions of securities to trading on UK markets”, the Treasury said, in a move that will impact the information public companies listed in the UK have to provide to investors.

Katie McCaw of Pinsent Masons, a specialist in the regulatory aspects of securitisation and debt capital markets transactions, said: “The government is now inviting ‘technical’ comments on the draft securitisation and prospectus statutory instruments by 21 August, having issued earlier drafts that were for illustrative purposes only. However, without the accompanying proposed regulatory rules – on which the FCA and PRA are to consult “in Q3 2023” – the full detail of how the regulatory regimes for securitisation and prospectuses will look once they are brought into the UK’s FSMA (Financial Services and Markets Act 2000) model is not yet clear.”

In terms of prospectuses, the FCA published engagement papers in May and they remain open for responses until 29 September.

Other changes planned before the end of the year include a streamlining of the consumer information requirements current account providers face under the Payment Account Regulations, while a further statutory instrument is envisaged to “provide a continuous, live, electronic feed of market data that will make it easier for market participants to access the data they need to make informed investment decisions” – described as a “UK consolidated tape”.

The timeline for reforms was outlined in a new delivery plan that the Treasury published to coincide with UK chancellor Jeremy Hunt’s Mansion House speech on Monday evening. Publication of the plan follows earlier announcements by the government of its intention to deliver a smarter financial services regulatory framework in the UK post-Brexit. It is supplemented by various other publications that each relate to specific aspects of reform the government is pursuing – some of which had already been consulted on.

Among the latest tranche of publications was confirmation of the government’s plans to scrap the Packaged Retail and Insurance-based Investment Products Regulation (PRIIPs) and conceive a new UK retail disclosure regime, and of its move forward with reforms to the Consumer Credit Act (CCA), following its consultation late last year.

A raft of pensions-related reforms are also envisaged, with the latest publications including the latest proposals for developing an industry-wide ‘value for money’ framework aimed at delivering good outcomes for pensions savers, fresh proposals to help savers in defined contribution (DC) schemes understand their options at the point they can access their funds, and proposals for a new regulatory regime for defined benefit 'superfund' consolidation schemes.

In his speech, Hunt confirmed that the government had reached agreement with nine DC scheme providers – Aviva, Scottish Widows, L&G, Aegon, Phoenix, Nest, Smart Pension, M&G, and Mercer – under which those businesses will aim to allocate at least 5% of their default funds to unlisted equities by 2030 in a move Hunt said “could unlock up to £50 billion of investment into high growth companies by that time” if followed by the other DC scheme providers in the market.

The Treasury’s delivery plan also provided an insight into the government's plans for financial services reform after the end of 2023. Work to reform the regulation of payment services is planned for 2024 and beyond, while reforms to the Capital Requirements Directive and Regulation (CRD/CRR) will also be pursued then as the government seeks to implement Basel 3.1 – international standards that concern the prudential regulation of banks.

This delivery plan paper also confirmed that new statutory instruments will need to be created to take forward new powers provided for under the new Financial Services and Markets Act 2023. This includes in relation to the new Designated Activities Regime (DAR) and to legislate for the ‘have regards’ that the regulators must consider when making rules in specific areas.

In respect of the DAR, the Treasury said it will create a single statutory instrument to “consolidate common supervisory, investigatory, and enforcement powers in a single place, to reduce the complexity for firms which perform more than one designated activity”.

The ‘have regard’ regime is designed to enable government to direct financial regulators to ‘have regard’ to specific aspects of public policy when exercising their new powers to write new regulations.