UK introduces financial regulatory reforms

Under reforms announced today by the UK Finance Ministry, the financial sector will be restructured, rules to hold bankers accountable for their decisions will be reduced and the capital adequacy of small banks will be reduced.

While London was largely cut off from the European Union (EU) after Brexit, Amsterdam overtook London to become Europe’s largest stock exchange center.

AThe announced reforms include a review of the short selling rules and company prospectuses published during the IPO, and the repeal or restructuring of rules created when the UK was a member of the EU.

DETAILS OF THE RULES

The reforms also target two sets of rules created in the wake of the country’s economic crisis more than a decade ago. During the financial crisis, the UK government had to bail out capital-strapped banks, but only a few bankers were penalized as a result.

The reform mainly targets senior managers and the so-called certification regime (SMCR). According to the SMCR, banks and insurance companies are required to disclose the administrator responsible for each of their fields of activity, such as risk management. In this way, market regulators can penalize individuals for mistakes made.

The second specific set of rules requires banks to protect their deposits from risky activities, such as derivative contract transactions, by allocating capital to protect their retail units.

Reforming this rule will remove the requirement for retail-oriented banks and “lighten the burden of unnecessary regulation on businesses while keeping depositor protections constant.”

More radical action on hedge funds and bankers’ responsibilities is also possible, as the UK no longer has international regulations on which to agree. (Reuters)