On 20th July 2022, the Financial Services and Markets Bill 2022 (the Bill) was introduced into Parliament. At over 330 pages, the Bill is the largest piece of financial services legislation since the Financial Services and Markets Act 2000 (FSMA) was passed more than two decades ago.
Before the Bill was introduced into Parliament, government sources indicated that we should expect a second ‘Big Bang’ to echo the wide-ranging deregulatory changes introduced in 1986. Whilst many of the proposed changes to onshored Single Market legislation are indeed liberalising in nature, the main proposals were long expected, and the bigger story is the extent to which the government itself is seeking to exert greater control over regulatory standards. Following the first Big Bang, liberalisation of foreign ownership rules led to widescale consolidation of ownership of UK brokerages, with many legacy firms being bought out by US banks and other international firms. This time around the debate is again about ownership, but this time it is ownership of regulatory policy that is the focus, rather than ownership of firms themselves. This extends not just to ownership of rulemaking powers by the UK rather than the EU, but also the desire for HM Treasury to have greater control over post-Brexit rulemaking by the PRA and the FCA.
Balance of powers
Unusually, the focus on the eve of the Bill’s publication was on what isn’t in the Bill, rather than what is. In his speech at Mansion House on 19th July 2022, the current Chancellor of the Exchequer, Nadim Zahawi, confirmed that the much-rumoured new “call-in” powers allowing ministers to intervene in regulators’ decisions “in the public interest” have not made it into the Bill. The Chancellor stated that he was “keeping an open mind” as to whether such powers were appropriate, but the sensitivity of such proposals were clear, bearing in mind the extent to which the Bank of England and the Prudential Regulation Authority (PRA) value their independence, something that was made very clear by the current Governor of the Bank of England in his own Mansion House speech the same evening.
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