The Financial Services and Markets Bill: What Made the Difference?

The Financial Services and Markets Bill (the Bill), introduced in Parliament last week, implements the future regulatory review that has been carried out to examine how the regulatory framework for financial services should fit now that the UK is no longer part of the EU. Nadhim Zahawi, in his maiden speech at Mansion House as Chancellor of the Exchequer, underlined the clear goal of keeping the UK as the most open, inclusive, welcoming, competitive, secure and transparent place to do financial services business worldwide and spoke of a “vision of a more open, competitive, green and technologically enabled sector.”

What the bill does not cover

Before looking at what’s in the bill, it’s worth noting what was not included. The bill that has been introduced in Parliament does not include the “appeal” powers. These powers would have allowed ministers to intervene in decisions made by regulators in the “public interest”. Although it did not go so far in terms of government oversight or interference in regulatory decisions, the bill includes obligations for UK regulators to keep their rules under general scrutiny and gives the Treasury the power to appoint an independent third party to review regulators. rules for them.

What the bill covers

Although described by the Chancellor as just part of the government’s financial and professional services programme, the bill covers a wide range of regulatory issues. Key inclusions are:

Future regulatory framework Exam

The Treasury will have the power to amend or redraft retained EU legislation and replace old references to EU secondary legislation with “the goal to make the law clearer or more accessible.

Wholesale Markets Review

The government aims to “enhance the competitiveness and increase the flexibility of wholesale market regulation” and, through the bill, is implementing a number of amendments to the Markets in Financial Instruments Regulations which have were identified during this review. One of these changes is to remove the requirement to trade shares, which will allow companies to be able to trade shares on any trading venue in the UK or overseas with any any consideration. The bill also gives the FCA the power to modify or suspend derivatives trading requirements, subject to Treasury approval. The aim is to prevent or mitigate market disruptions.

Critical third parties

Also with the aim of reducing the risk of disruption to the financial services sector, the Treasury may designate, on the recommendation of regulators, certain third parties as “critical”. This will give the Bank of England, PRA and FCA the ability to directly oversee critical services provided by these critical third parties to regulated businesses by setting rules, gathering information and being able to take action if those rules or this information requires it. are not respected.

Crypto assets

The Treasury will be given new powers to introduce rules on the regulation of payments and service providers in relation to “digital settlement assets”, in other words cryptocurrency. This will launch the UK’s approach to securely adopting cryptocurrency as a suitable means of payment. Initially, the government will regulate “stablecoins” (excluding utility, security and e-money tokens), although it is possible to include broader sets of crypto assets in the future. such as exchange tokens like Bitcoin. Service providers will be regulated to the same standards as the traditional payment chain. This objective will be achieved by modifying the existing regulations on electronic money and payment services.

Next steps

Looking ahead, the second reading of the bill will take place on 7e September 2022.

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