Future Regulatory Framework

What should the UK’s regulatory landscape look like?

Shaping a new regulatory framework for the UK

A broad programme of work is underway to shape the future of financial services regulation in the UK. This will impact all financial entities that operate in the UK’s financial system. 

Our financial regulation team has extensive experience of guiding financial institutions of all types through regulatory change. We have brought together the important initiatives to be aware of below. Get in touch if you would like to discuss what this means for your business.

Status of key initiatives

 

Future Regulatory Framework Review: Phase 2

What is it?
A consultation on how financial services policy and regulation are made in the UK.

What does it say?
It proposes a model in which UK financial services regulators lead on developing regulatory requirements for firms, subject to arrangements allowing for accountability to and scrutiny by HM Treasury and Parliament.

What happens next?
The consultation closes on 19 January 2021. A second more detailed consultation in 2021 will set out specific proposals for how the future regulatory framework will be delivered.

Read a summary of the paper on our knowledge portal.

Read our report on the architecture for regulating finance after Brexit.

Financial Services Bill 2019

What is it?
Draft legislation intended to maintain the competitiveness of the UK financial services sector.

What does it say?
The Bill proposes new prudential standards to implement Basel III and the IFPR, a new Overseas Funds Regime and powers for the FCA to oversee an orderly transition away from LIBOR.

What happens next?
The Bill is currently progressing through Parliament having been introduced on 21 October 2020.

Read our briefing for a summary of the Financial Services Bill.

Read our paper on the UK Overseas Fund Regime. 

UK equivalence decisions

What is it?
A guidance document setting out more detail on the process and the principles that underpin the UK’s equivalence framework.

What does it say? 
The UK will fully onshore the EU’s equivalence framework at the end of the Brexit transition period, although some aspects are already in effect. The guidance document reiterates the UK’s commitment to an outcomes-based approach to equivalence.

What happens next?
Nearly all equivalence decisions made by the EU will be retained in UK law at the end of the Brexit transition period. The UK Government has also made equivalence determinations in favour of the EEA in some areas.

Read our briefing on the guidance document and the Chancellor’s statement on the future of UK financial services.

Review of the Overseas Persons Exclusion

What is it?
HM Treasury are assessing the ways in which overseas firms can access UK financial markets.

What does it say?
A call for evidence will ask for industry input on how the different components of the UK overseas regime, including the overseas persons exclusion or OPE, are currently being used.

What happens next?
HM Treasury are due to launch the call for evidence before the end of 2020.

 

Payments Landscape Review

What is it?
A review led by HM Treasury which is intended to ensure that regulation and infrastructure keeps pace with new payments models.

What does it say?
A call for evidence sets out the Government’s aims for payments networks in the UK, assesses how well the present system is operating and raises questions about the opportunities and risks that need to be addressed.

What happens next?
The call for evidence closed on 20 October 2020. By Q1 2021 HM Treasury is expected to provide a summary of responses and set out next steps for the review.

Listen to our payments podcasts.

Fintech Strategic Review

What is it?
An independent review established by HM Treasury to establish priority areas for industry, policymakers and regulators to explore to support the UK fintech sector.

What does it say?
The terms of reference for the review set out three objectives which include ensuring UK fintech has the resources to grow and succeed. The review comprises five workstreams: skills and talent, investment, national connectivity, policy, and international attractiveness and competitiveness.

What happens next?
The review aims to report back to HM Treasury at the start of 2021. HM Treasury will then publish a response.

Keep up to date with fintech developments via our FintechLinks blog.

Investment Firms Prudential Regime

What is it?
The UK regulators are to be given powers to implement the EU Investment Firms Regulation / Directive.

What does it say?
HM Treasury has confirmed that the UK will adopt the EU regime but in a “flexible and proportionate” manner, accounting for “specificities” of the UK financial services market. An FCA discussion paper indicates how the new regime will impact UK firms.

What happens next?
The FCA is due to consult on the IFPR before the end of 2020. The Treasury has said that it is targeting an implementation date of 1 January 2022.

Find out more about the Investment Firms Regulation. 

New regulatory regime for challenger banks

What is it?
A potential post-Brexit regulatory regime for smaller banks.

What does it say?
The PRA has said that it is considering introducing a “strong and simple” prudential regime for smaller banks and building societies.

What happens next?
The PRA is considering publishing a discussion paper on this topic in spring 2021.

Read our note on how the PRA expects UK banks to move beyond base camp.

FCA Approach to International Firms

What is it?
A consultation paper which sets out the factors that the FCA will consider when assessing overseas firms which seek authorisation in the UK.

What does it say?
An international firm seeking UK authorisation will need to demonstrate that it is “ready, willing and organised” and meets the FCA’s general expectations against certain “minimum standards”.

What happens next?
An update is expected in 2021.

Read our briefing on the FCA’s proposed approach.

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