Queens Speech the starting shot for UK regulatory financial services change

The Queen's Speech has been published. It includes details of the Financial Services and Markets Bill, which will contain post-Brexit regulation on new areas including cryptocurrencies and wholesale markets. It also includes the "Brexit Freedoms Bill" that provides ministers with the power to repeal pieces of EU legislation written into the UK's framework without seeking specific parliamentary votes on such. The detail is still to come but we now expect that many of the significant MiFID II amendments proposed can now be carried out – with a lot still for the FCA to do by way of consultation (given how stretched it is currently, we wonder whether this will be more light jog than a sprint).

Background

The speech has been anticipated by the financial services industry. In his speech at Mansion House in July 2021, the Chancellor set out the Government’s vision for a financial services sector that is globally competitive and acts in the interests of UK communities and citizens. The Financial Services Act 2021, which received Royal Assent in April 2021, was the first major piece of UK post-Brexit legislation. It contained a number measures designed to improve the UK regulatory framework (including measures to amend UK MIFID, the UK Market Abuse Regulation and payment services legislation). The Government indicated at the time that a thorough review of financial services regulation was in the pipeline. In a recent speech, John Glen, Economic Secretary to the Treasury, spoke about how the Government would use post-Brexit freedoms to create the right legislation to support an even stronger financial services sector. HMT recently published the Wholesale Markets review (see our briefing here), containing important proposals in relation to UK MIFID. Some of its proposals will fall within the Financial Services and Markets Bill – so this helpfully starts the ball rolling on those reforms.

Areas covered by the Bill include the following:

• Regulatory regime for wholesale markets, including amendments to Solvency II and MiFID II: amendments in these two areas appear to be the centre-pieces of the current governments initial post-Brexit wholesale reforms. The scale of these is tempered by industry concerns of expensive operational change to systems / arrangements that have been put in place. However, obligations such as the share trading obligation are removed, while reforms to pre/post trade transparency (for example) will have to await further FCA consideration/consultation.
• Regulation of stablecoins and cryptoassets: more work will need to be done in defining the perimeter and how these are marketed (much will be for the FCA as much as the Government).
• Access to cash legislation: this is in response to concerns that despite the increase in the use of digital payments, significant parts of the UK population still rely on cash in their day-to-day lives and measures are needed to maintain access. The Government issued a consultation on access to cash in July 2021, setting out a number of proposals (including a proposal to provide HM Treasury with powers to set legislative geographic access requirements upon designated firms to protect access to cash across the UK). It also legislated in the Financial Services Act 2021 to amend payment services legislation to encourage the adoption of cashback without a purchase. The FCA has also issued guidance for banks, building societies in relation to branch closures.