TIGRR report- likely changes to UK financial services regulation

On 16 June 2021, the Government published report by the Taskforce on Innovation, Growth and Regulatory Reform (TIGRR) containing a number of wide-ranging recommendations in relation to the UK financial regulatory framework. At this stage, the proposals are prospective as the Government still has to review them and issue its own formal response. Some of the proposals echo what has been noted by other reports/existing initiatives. To this end, many of the financial services recommendations within the report are not completely novel, but repeating them does add weight to certain issues (e.g. abolishing RTS 27 reports and amending the PRIIPs regime). Unsurprisingly, the report is very keen for the UK to maintain its leadership position in the area of Open Finance and FinTech.

The key recommendations in the report are set out below.

· Regulatory approach: the UK should restore a common law principles-based approach to regulation. The report states that as result of the EU's regulatory philosophy (to impose grand, codified schemes), the UK financial services regulatory system has become too rigid and detailed. The report recommends the UK move away from this approach and acknowledges HMT's Financial Services Framework Review as a welcome start. Examples of changes recommend in this vein include amending the position limits derived from the MiFID II to introduce greater flexibility and introducing a more judgement-based approach to calculating central counterparty (CCP) margins.

· MiFID: amend disclosure and transparency requirements for financial products. The report refers to FCA proposals to suspend RTS 27 reporting requirements (see Ashurst newsflash) and states that this requirement should be done away with permanently if it can be shown that the reports do not add value. The report also calls for the removal of the requirement to provide cost and charges reports to professional investors and eligible counterparties (the EU has similar proposals under MIFID Quick Fix). The report also calls for MiFID position limits regime to be amended.

· MAR: remove the investment recommendation disclosure from MAR for wholesale clients. The report believes that existing regime is burdensome and costly and that it also not supported by the buy-side it is intended to help.

· PRIIPs: confine the key information disclosure requirement in PRIIPs to genuinely complex products. The report states that these would be products that require special explanation to the retail market and that vanilla bonds should be exempt from the scope.

· Other disclosures and reporting requirements: linked to the above recommendation on PRIIPs, the report notes that for outside the retail market, the UK should allow for key information to be provided in less-prescriptive ways than those set out in the PRIIPs Regulation’s templates. Additionally, the report notes the potential to apply a more proportionate approach to a range of other disclosure and reporting requirements, including the Cross-Border Payments regulation, the Deposit Guarantee Scheme Directive, the Mortgage Credit Directive and the Payment Accounts Directive.

· UK FinTech: adopt new regulatory framework that supports UK leadership in FinTech and digitalisation of financial services infrastructure. This and other proposals concerning FinTech in the report echo many of the recommendations set out in the February 2021 report of the Kalifa Review (see Ashurst briefing).

· Open Banking: mandate the expansion of Open Banking to Open Finance quickly and adopt a more market-style, Australian approach. In March 2021, the FCA issued a Policy Statement setting out its next steps in relation to Open Finance. These included working with BEIS and HM Treasury on the appropriate legislative and regulatory framework to support Open Finance (see Ashurst briefing). TIGRR argues that the planned timeline for implementing supporting legislation is too slow and argues that BEIS should forward its smart data legislation as soon as possible this year.

· Challenger Banks: increase competition by adopting a graduated regulatory approach to challenger banks. The report argue that aspects of current legislation, such as those relating to capital requirements, may be impeding competition and have not helped to break up the highly concentrated retail banking sector. It states that small banks should be subject to simplest regulation. This aligns with proposals set out in the PRA's April 2021 discussion paper in relation to its new "strong and simple" framework for non systemic banks.

· Central bank digital currency: accelerate plans to launch a CBDC and launch a pilot within 12-18 months. The report believes that all major central bank currencies will eventually be digitised and notes that many jurisdictions are making plans in this direction. The Bank of England issued a summary of responses to its March 2020 discussion paper on CBDC and has also published a discussion paper on the uses of digital money.

· Data Protection: replace GDPR with a new UK framework for data protection. The report calls for a new more proportionate UK Framework for Citizen for Data Rights, to give people greater control of their data while allowing data to flow more freely and drive growth across healthcare, public services and digital economy.

In a letter in response to the report, the Prime Minister confirmed that the Government would publish a formal response to the report as soon as practicable.

Author: Bisola Williams