Making the UK an easier location for overseas investment
In a budget which was largely overshadowed by COVID-19, the Chancellor also concentrated on the government’s plans to bring business to the UK post-Brexit.
The financial services sector was informed about several changes and consultations planned by the government in order to create a cooperative and accessible market for overseas investment.
A brief overview of the key proposals the government have put forward in relation to the financial services sector are:
1. FinTech review and delivery panel – there will be a FinTech review, led by Ron Kalifa OBE, to identify what more industry and government can do to support growth and competitiveness in this sector. The government will also extend funding for the Fintech Delivery Panel.
2. Cryptoassets consultation – In exploring the opportunities and challenges that can be brought by digital currency, the Bank of England’s discussion paper on a possible UK central bank digital currency (CBDC) will be published and a consultation on the scope of financial regulation of cryptoassets will be brought: the government intends to consult on a measure to bring certain cryptoassets into scope of financial promotions regulation; and, later in 2020, on the broader regulatory approach to cryptoassets, including new challenges from stablecoins.
3. Payments landscape review, access to cash and digital identity – HM Treasury, working alongside the regulators and the Financial Policy Committee, is leading a Payments Landscape Review to make sure the UK’s payments infrastructure and regulation are keeping pace. As part of this, the Treasury will ask for evidence on what can be done by industry stakeholders, regulators and the government, to foster innovation and resilience in the payments system. In addition, the government will bring forward legislation to protect access to cash for those who need it. The government will also create a Digital Identity Unit to establish a digital identity market, enabling people to provide information about themselves, and banks and other financial services firms to verify the identity of customers, electronically without the need for paper documentation.
4. SMEs, open finance and credit– in order to realise the vision for truly open finance, in which SMEs can share their data at the touch of a button, making it faster and easier for them to shop around for credit, HM Treasury will convene a summit where participants will discuss what further data needs to be opened up to facilitate SMEs’ ability to compare credit products and providers.
5. Reforming Regulation Initiative, Pioneer Fund and regulatory coordination – the government will collect ideas from businesses and public to ensure that the regulatory system is sensible and proportionate now that the UK has left the EU. The consultation is currently open until 11 June 2020 and is aimed at the needs of small businesses. The government will launch a second round of the Regulators’ Pioneer Fund, to enable regulators to unlock the potential of emerging technologies and help businesses to develop innovative products and services. At the same time, the Financial Services Future Regulatory Framework Review (which was announced at Mansion House in 2019) will look into how to improve the coordination between regulators during regulatory interventions, authorisation, supervision and enforcement: a new forum, bringing together Bank of England, Prudential Regulation Authority, Financial Conduct Authority (FCA), Payment Systems Regulator and Competition and Markets Authority, with HM Treasury as an observer member, will provide industry with a forward-look of upcoming regulatory initiatives.
6. Economic Crime Levy – firms subject to Money Laundering Regulations will be required to pay a new levy to help fund government action to tackle money laundering and to ensure it delivers the reforms it has committed to in the Economic Crime Plan. The new levy will be additional to ongoing public sector funding. There are currently no details on how this levy will calculated; however, there will be a consultation on the levy later this spring.
7. The introduction of a new Financial Services Bill – The Bill was announced in the Queen’s Speech on 19 December 2019 and its purpose is threefold:
a. To support a vibrant asset management industry by simplifying the process for overseas investment funds seeking to market into the UK. The new regime will permit UK access if the funds are located in jurisdictions where there are “equivalent” regulations and investor protections to those required by UK authorised funds.
b. To implement the remaining Basel banking standards and more proportionate prudential regulations for investment firms (firms must have enough capital and liquidity to operate effectively through period of economic stress without causing harm to their customers, and the winder financial system).
c. To provide long-term market access between the UK and Gibraltar for financial services firms following EU exit.
8. Review of UK funds regime – this review will cover direct and indirect tax, as well as regulation and consider whether policy changes might be needed to make the UK a more attractive location for companies used by funds to hold assets.
If you have concerns about how any of the above proposals could affect your financial services business, you should seek advice. Fox Williams can advise on the steps and processes you need to take to feed into relevant consultations and / or to meet any current or upcoming regulatory requirements. For further information, please contact the team at MMacGregor@FoxWilliams.com or CFinney@FoxWilliams.com.