Financial Services Bill introduced to Parliament
22 Oct 2020
The government has introduced the Financial Services Bill as a first step in shaping a regulatory framework for the UK’s financial services sector outside of the EU
22 Oct 2020
Measures in the bill, which is currently going through the Parliamentary process, are intended to enhance the UK’s world-leading prudential standards and promote financial stability.
They include regulations to enable the implementation of the remaining Basel III standards. There is a new prudential regime for investment firms.
The bill also clarifies and extends the Financial Conduct Authority’s (FCA’s) powers to ensure the orderly wind-down of the critical LIBOR benchmark.
The measure will extend the transitional period for third-country benchmarks from end-2022 to end-2025, avoiding financial stability risks and economic repercussions for UK users should they lose access.
In order to promote openness between the UK and international markets, the bill will introduce new equivalence regimes for retail investment funds and money market funds, which will simplify the process for investment funds that are domiciled overseas to market to UK consumers.
There is a Ministerial commitment to provide long-term access between the UK and Gibraltar for financial services firms on the basis of alignment and cooperation, now that the UK and Gibraltar have left the EU.
In addition, the bill includes a number of smaller measures to maintain an effective financial services regulatory framework and sound capital markets.
These include measures to improve the functioning of the Packaged Retail and Insurance-based Investment Products Regulation, and increased penalties for market abuse.
There are two amendments to the Market Abuse Regulation to bolster the effectiveness of the regime while reducing some of the administrative burden on issuers, while the maximum prison sentence for market abuse is increased from seven to 10 years.
Other measures are the streamlining of the FCA’s process for removing a firm’s authorisation and taking them off the public register, to improve accuracy and reduce the risk of fraud; making the appointment of the FCA CEO subject to a fixed, once renewable, five-year term; strengthening the Statutory Debt Repayment Plan (SDRP) regime; and legislation so when a Help to Save ISA matures, and the account holder has not transferred it elsewhere, the balance can be transferred into a standard NS&I savings account automatically.
John Glen, economic secretary to the Treasury, said: ‘Now the UK has left the EU, we must ensure we have a regulatory regime that works for the UK and allows us to seize new opportunities in the global economy.
‘Following the work we’ve done to prepare for EU exit and ensure a smooth transition to a UK rule book, this Bill is the next step in delivering a regulatory framework that boosts the competitiveness of our world-leading financial services sector and ensures that UK consumers are properly protected.’
Bob Wigley, executive chair of UK Finance, said: ‘This legislation is an important part of ensuring we have the right regulatory framework in place following the end of the transition period.
‘The UK’s future success as a world-leading financial centre will best be underpinned by a strong and proportionate regulatory framework that protects consumers, enhances our competitiveness and makes the UK attractive for international investment.
‘The industry looks forward to working closely with the Treasury and Parliament as this legislation is finalised and as we continue supporting consumers and businesses through the economic recovery ahead.’
The FCA said it particularly welcomed the bill’s provisions to amend the Benchmarks Regulation, and reminded market participants to maintain their focus on the transition away from LIBOR by the end of 2021.