The Edinburgh Reforms build upon the themes set out in then Chancellor Rishi Sunak’s 2021 Mansion House speech, but with a new explicit focus on consumers. They look to create a competitive marketplace promoting the effective use of capital, giving consumers the ability to access new products and technologies. The aim is to create “a sector at the forefront of innovation and technology”, and a world leader in sustainable finance.

Financial services is a stated priority area for the government’s review of retained EU law and it is claimed that the proposed reforms will include repealing and replacing “hundreds of pages of burdensome EU retained laws”.

While some media headlines pick up on the government’s hyperbole (“…biggest shake up in more than 30 years”; “… sweeping reforms to financial sector”), others have expressed concerns that the proposals undo previous reforms that sought to remedy the causes of the global financial crisis in 2008/09, such as ringfencing. 

The list of areas targeted for reform is extensive, but a significant proportion of the proposals are not new – they are part of the process of legislation or policy review that should happen in a normal, well-functioning system. They are not responding to an obvious and significant market failing (eg, review of the securitisation regulations). Other matters have been widely trailed and are underway, notably as part of the Financial Service Markets Bill (eg, Solvency II reform). 

There is detail behind a number of the proposals – notably where they implement the outcomes of a prior review (the Skeoch Ring-Fencing and Proprietary Trading Review or Lord Hill’s UK Listings Review, for example). We may, however, need to wait for the outcome of further consultation to know for certain what changes will be made. 

For other proposals, it is not possible to say what they might mean in practice, nor what the overall effect might be. The first step, in some cases, is for the government or the regulators to conduct a review (eg, Senior Managers and Certification Regime (SMCR)). Others empower the regulator, so we need to see how it will react. There is the potential for real impact, but we may have to wait a while before we know the extent of its effects – and even longer before we feel them. 

While it is not the government’s intention, there remains a risk that prudential and conduct standards are relaxed too far in the pursuit of growth. The future consultations will need to be evidence led, with robust cost benefit analyses, to ensure this risk is minimised.

It is also true that exiting the EU enables a more UK-centric approach to be taken for some policies. That is not the case for all policies, however, as some are a specific UK response to earlier events, such as SMCR and ringfencing. These did not require exiting the EU to make change.

Relevant links

• Collection: Financial Services: The Edinburgh Reforms - GOV.UK (www.gov.uk)
• Press notice: Edinburgh Reforms hail next chapter for UK Financial Services - GOV.UK (www.gov.uk)
• Chancellor’s statement: Written statements - Written questions, answers and statements - UK Parliament
• Mansion House speech (July 2021): Mansion House Speech 2021 – Rishi Sunak - GOV.UK (www.gov.uk)
•  Mansion House documents: A new chapter for financial services - GOV.UK (www.gov.uk)