UK Proposes Major Overhaul Of Financial Regulation

An extensive package of financial regulation reform was announced by the British government in a major regulatory shakeup, which is aimed at overhauling the complicated EU laws.

Named the Edinburgh Reforms, the reform package comprises 30 measures, which include revising the landmark regulations that had been launched after the financial crisis of 2008.

Edinburgh Reforms

One of the major changes that the Edinburgh Reforms introduce is the revisions to the law requiring banks to keep their consumer and investment bank’s arm separate, which has been named the ‘ringfencing’ regime.

There is also a modification included for the Senior Managers and Certification regime according to which the responsibility of the poor conduct of banks is on its leaders.

Statutory secondary objectives have also been introduced for the financial regulatory authorities in the UK in the reform package.

This means that in addition to their supervisory and regulatory activities, the Prudential Regulation Authority and the Financial Conduct Authority will also have to take into account the impact on international competitiveness and growth.

The overhaul was defended by Jeremy Hunt, the finance minister of Britain, as many have been left uneasy by the reforms.

In fact, some have gone as far as accusing the government of forgetting the lessons learned from the financial crisis in 2008.

The response

Responding to the criticism, Hunt said that banks are in a much stronger position now than they were back in 2008 when 137 billion pounds were spent by the Labour Party government for bailing them out.

Hunt further asserted that the regulatory freedoms that Britain has gotten post-Brexit have made these reforms a possibility.

However, critics have argued that Brexit is the primary reason for most of the malaise that the financial sector in the UK is dealing with.

They have noted that a lot of companies lost their access to the financial markets in Europe and passporting rights when the UK left the EU.

This refers to the EU laws permitting companies based in EU countries to conduct business freely in all member nations.

The aim

The government has introduced these reforms to attract banks and capital to the UK, but experts have said that most of the financial regulation is based on experience and lessons and not dramatic sudden changes.

Some influential business groups did appreciate the Edinburgh Reforms after they were announced. One of the biggest business lobby groups in Britain has argued that the reforms can build a competitive and dynamic financial sector.

But, there is also another side of the political aisle and they do not agree. Many have said that there were good reasons for introducing the older regulations and that new ones could hurt the financial industry.

Moreover, the British government’s aim to overhaul ringfencing has also given rise to some concerns because they believe that it could actually result in another crisis like the one in 2008.

But, the details indicate that the reforms are unlikely to change much in the retail banking landscape of the UK.

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