Growth mindset: Mansion House package backs regulatory reform for economic growth
Rachel Reeves has used her first Mansion House speech as Chancellor to put forward reforms aimed at making the UK financial services sector more competitive.
A strategy for growth
The government has sent new “growth-focused” remit letters to the Financial Conduct Authority, Prudential Regulation Authority, Financial Policy Committee and Payment Systems Regulator. Last year the FCA and PRA were given new secondary objectives to promote the international competitiveness and growth of the UK economy. The latest remit letters reinforce the expectation on them to support the new government’s ambitions on economic growth.
In a call for evidence the government invites feedback on its plans for the financial services sector. Responses will inform the UK’s first Financial Services Growth and Competitiveness Strategy which the government will launch in spring 2025. The paper suggests strategy objectives and key policy pillars to support the five priority growth opportunities that the government has identified i.e. fintech, sustainable finance, asset management and wholesale services, insurance and reinsurance, and capital markets.
One of the key policy pillars is the regulatory environment. The government argues that it is possible to maintain high standards while minimising the compliance burden for firms and that regulation should allow for more responsible and informed risk-taking across the economy.
The call for evidence is open for four weeks until 12 December 2024.
Sustainable finance update
A consultation seeks views on the value of implementing a UK Green Taxonomy. Other jurisdictions have introduced a taxonomy for sustainable activities as a reference point for other policies aimed at increasing sustainable investment and/or reducing greenwashing. After several delays the UK has not yet put forward its own taxonomy. Now the government says that it wants to “learn the lessons” of taxonomy implementation elsewhere. The consultation asks, among other things, whether interoperability with existing taxonomies would be helpful.
The consultation closes on 6 February 2025.
Read our note: UK government consults on Green Taxonomy
The government has responded to its 2023 consultation on regulating ESG ratings providers, noting that there is strong support for the policy. It has also released draft legislation which applies to both UK and overseas based ESG ratings providers. Once the government finalises the regulations the FCA will consult on the specific rules that will need to be met by ESG ratings providers. This consultation will include exploring whether an overseas ESG ratings provider would be expected to set up a subsidiary in the UK.
The draft legislation is open for technical feedback until 14 January 2025.
Other announcements include:
- a plan to consult on sustainability disclosures for economically significant companies
- a H1 2025 consultation on transition plans
- co-launching the Transition Finance Council with the City of London Corporation
- launching a set of integrity principles for voluntary carbon and nature markets at COP29 ahead of a consultation in 2025
More reform for wholesale markets
A new policy paper sets out next steps for reforming the UK MiFID regime. The paper notes that the Financial Services and Markets Act 2023 delivered urgent outcomes following HM Treasury’s Wholesale Markets Review. Now the government commits to:
- giving the FCA more powers in relation to the reporting of over-the-counter positions, in response to the events in the Nickel market in March 2022
- revoking transaction reporting requirements under UK MiFIR and replacing them with a new regime set by the FCA (see below)
- replacing the MiFID Org Regulation with FCA rules - Read our note: FCA moves MiFID Org requirements into Handbook and seeks feedback on future changes
Earlier this year the government consulted on allowing private companies to trade their securities on an intermittent basis on a platform known as PISCES. The government has now responded to its consultation. Following feedback, PISCES will not include a market abuse regime but rather the FCA will be given rule-making powers to create a bespoke disclosure regime for PISCES. The government has published the draft legislation which will establish the PISCES sandbox.
Feedback on the draft legislation is due by 9 January 2025. The government intends to lay the legislation by May 2025.
Read our note: New markets for private company shares: the PISCES sandbox is confirmed
The FCA has also opened a discussion paper on improving the UK transaction reporting regime. DP24/2 asks for feedback on the most challenging aspects of the existing regime and whether there are duplicative reporting requirements that can be removed. Other more detailed questions consider, for example, trusts, tokenised securities and the inclusion of a new field to identify the MiFID categorisation of the client.
The Discussion Paper closes on 14 February 2025.
Read our note: FCA seeks market feedback on transaction reporting requirements
Setting a vision for the payments sector
The main recommendation from Joe Garner’s 2023 review on the future of payments was that the government should set out a clearer strategic direction for UK payments. In response, the government has now released its National Payments Vision.
Points to note include:
- Following slow progress under the Joint Regulatory Oversight Committee, the FCA will become the UK’s regulator for Open Banking under the Data (Use and Access) Bill and JROC will now be wound down
- Unlocking Open Banking enabled account-to-account payments for e-commerce is a strategic short to medium term priority
- Following the FCA’s work on data asymmetry between Big Tech companies and financial services firms, the government will consider whether policy changes are required to align incentives between data users and holders e.g. reciprocal obligations or reasonable compensation where APIs are accessed at significant scale
- Strong customer authentication legislation will be revoked and replaced with a more outcomes-based regime set by the FCA
- A new Payments Vision Delivery Committee will task the Bank of England and PSR to propose reforms to Pay.UK’s governance arrangements and funding model by mid-2025
- By the end of 2025 the Committee will publish a Payments Forward Plan for completing infrastructure initiatives
The government says that it has written to the tech and telecommunications sectors to call for demonstrable action to reduce the scale of incidents and losses from fraud taking place on their platforms and networks. The government will request updates on progress and action taken at the next Joint Fraud Taskforce in March 2025. The government also plans to release an expanded fraud strategy in 2025.
Read our note: Eye on the horizon: UK sets National Payments Vision
Pension reform on the horizon
The interim report of the Pensions Investment Review is accompanied by consultations which include proposals for fundamental changes to the defined contribution pension scheme market. The government says it will legislate where needed in the upcoming Pension Schemes Bill.
Read our note: Significant reforms proposed to the defined contribution pension scheme market
Closing the advice gap
In 2023 the government and FCA put forward proposals to improve how people can access help with their pensions and investments. The Advice Guidance Boundary Review (FCA DP23/5) considered ways to close the advice gap. The FCA has now shared feedback on that policy paper.
Read more: FCA sets out next steps for Advice Guidance Boundary Review
In December 2024 the FCA will consult on proposals for targeted support in pensions. According to the FCA, this would allow firms to provide support to pension savers in a new way. Then in H1 2025 the FCA will develop related proposals for targeted support in relation to wider investments and consult on the draft FCA rules that will apply across consumer investment and pensions.
Modernising the FOS
The FCA has launched a call for input on how to modernise the redress framework. Feedback is sought on, for example, the problems that mass redress events cause and what changes could be made to enable the FCA and Financial Ombudsman Service to manage mass redress events.
The deadline for responding to the call for input is 30 January 2025. The FCA plans to explore next steps in a paper in H1 2025.
Read our note: Re-dressing redress - the FCA and FOS joint Call for Input
Other announcements
- A consultation on abolishing the Certification Regime under the SMCR so that it can be replaced with a more proportionate approach
- A pilot to deliver a Digital Gilt Instrument, or DIGIT, using distributed ledger technology
- A call for evidence on changing the credit union common bond requirement
- Letters to the FCA and PRA requesting a report on the mutuals sector landscape
- A consultation on a new framework for UK-based captive insurance companies - Read our note: UK government seeks views on a new approach to captives
