Chancellor sets ambition for future of UK financial services

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Following the UK’s departure from the EU, the government’s approach to financial services will be guided by what suits the UK and one of its most productive and innovative sectors.Welcoming the start of a new chapter for UK financial services, the Chancellor laid out plans to boost the sector’s dynamism, openness and competitiveness – including the issuance of the UK’s very first Sovereign Green Bond, becoming the first country in the world to make TCFD- aligned disclosures mandatory, reviewing the UK’s registration scheme to attract the most innovative companies and leading the global conversation on new technologies such as stablecoins and central bank digital currencies.

Rishi Sunak, Chancellor of the Exchequer, said:

We are opening a new chapter in the history of financial services and renewing the UK’s position as the world’s leading financial center. By making as many equivalency decisions as possible in the absence of clarity from the EU, we are doing what is right for the UK and providing businesses with certainty and stability.

Our plans will ensure the UK evolves as an open, attractive and well-regulated market, and continues to be the world leader in pioneering new technologies and reorienting finance towards a net zero future.

Positioning the UK at the forefront of green finance

Recognizing that financial services are a critical catalyst in the quest for net zero, the Chancellor presented new proposals to support sustainable financial flows and expand the UK’s global leadership in green finance ahead of hosting COP26.

To help the UK meet its 2050 net zero target and other environmental targets, the government will issue its first sovereign green bond in 2021 subject to market conditions – and intends to continue with a series of other issues to meet growing investor demand for these instruments. . These bonds will help fund projects that will tackle climate change, fund much-needed infrastructure investments and create green jobs across the country.

The Chancellor also announced the introduction of more rigorous environmental disclosure standards so that investors and businesses can better understand the significant financial impacts of their exposure to climate change, more accurately assess climate-related risks and support the greening of the environment. the UK economy.

The UK will become the first country in the world to make climate-related financial disclosures (TCFD) aligned disclosures fully mandatory across the economy by 2025, going beyond the “comply or explain” approach.

The joint government regulator TCFD working group will today release its interim report with a roadmap for implementing mandatory disclosures, many of which will come into effect by 2023. Upcoming rules and regulations will cover part important to the economy, including UK listed trading companies. large registered private companies, banks, building societies, insurance companies, UK licensed asset managers, life insurers, FCA regulated pension schemes and occupational pension schemes.

The UK will also implement a Green Taxonomy – a common framework for determining which activities can be defined as environmentally sustainable – which will improve understanding of the impact of business activities and investments on the environment and support our transition. towards a sustainable economy.

UK Taxonomy will use the scientific parameters of the EU taxonomy as a basis and a UK Green Technical Advisory Group will be established to review these parameters to ensure they are suitable for the UK market.

And to support and benefit from the development of common international standards on taxonomies, the UK also intends to join the international platform on sustainable finance.

Extending UK leadership in FinTech

The UK has long been a pioneer in financial services and will remain at the forefront of technological innovation.

New technologies like stablecoins – private digital currencies – could transform the way people store and exchange their money, making payments cheaper and faster.

To harness the potential benefits of stablecoins, while managing risks to consumers and financial stability, the government will propose a regulatory approach for relevant stablecoin initiatives that ensure they meet the same minimum standards that we expect from other modes of trading. payment.

And as the UK plays a leading role in the central bank’s global digital currency conversation, the Chancellor praised the work of HM Treasury and the Bank of England to examine whether and how central banks can issue their own digital currencies in addition to cash.

Equivalence and openness

The UK’s attractiveness as a global financial center is underpinned by its openness to international markets and rigorous regulatory standards.

Equivalence is one of the UK’s central mechanisms for managing cross-border financial services activities with the EU and beyond.

To bring certainty and reassurance to businesses and international partners, the Chancellor today announced the publication of a guidance document outlining the UK’s approach to equivalency with foreign jurisdictions – an approach based on technical results which gives priority to stability, openness and transparency.

The Chancellor also announced that the UK will grant a set of equivalency decisions to EU and EEA member states.

By announcing as many decisions as possible before the end of the transition period, the UK is delivering on its commitment to be open, predictable and transparent, even in the absence of clarity from the EU on its approach, and to deliver certainty to companies in both cases. UK and EU.

The government does not rule out new equivalency decisions when these are in the UK’s interest and remains open to a more in-depth dialogue with the EU on their intentions.

UK approach to regulation outside the EU

As the UK builds a global role outside the EU, it has a unique opportunity to ensure its regulatory approach to financial services is tailored to UK markets and enables it to seize opportunities on the global stage .

The Financial Services Bill, which will be debated in the House today, is an important step in the process of adapting UK regulations to reflect its new position and strengthen the competitiveness of the sector, while demonstrating that the UK remains committed to the highest international regulatory standards.

The government is undertaking a series of reviews to ensure that the regulations strengthen the UK’s attractiveness for business and its position as a global financial center.

As part of this, the Chancellor today presented plans to increase the number of new businesses wishing to register in the UK. This includes the creation of a task force that will propose reforms to the UK listing regime to attract the most innovative and successful companies and to help companies access the finance they need to grow.

The government will also issue a call for evidence on Britain’s overseas regime to ensure it supports the UK’s position as an open global financial center.

To further strengthen the UK’s appeal for asset management, the government will soon publish a consultation on reform of the UK fund regime.

And to encourage investment in long-term illiquid assets, such as infrastructure and venture capital, the Chancellor has announced his ambition to launch the UK’s first long-term asset fund within a year. .

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