The United Kingdom will relax financial sector rules to boost investment after Brexit

LONDON, Sept 28 (Reuters) – Britain unveiled plans on Thursday to relax key banking and insurance rules, in the latest attempt to boost its vital financial sector following the country’s exit from the European Union.

Brexit has isolated the British financial industry, which accounts for around 12% of the UK’s economic output, from much of the EU and sector officials want the government to speed up reforms to help it remain globally competitive. world.

London’s financial hub also faces stiff competition from New York in company listings, and a survey on Thursday showed Singapore It is now almost on par with the British capital in the ranking of world financial centers.

Continuing with the “Edinburgh Reforms” outlined in December, the Ministry of Finance established a Public consultation on proposed secondary legislation to implement recommendations made in a review by a panel led by Keith Skeoch, a former investment fund boss.

The bill proposes increasing the threshold at which so-called ring-fencing is applied to banks from 25 billion pounds ($30 billion) to 35 billion pounds.

Britain introduced the backstop rule in January 2019, following costly taxpayer bank bailouts during the global financial crisis more than a decade ago. Its goal is to ensure that deposits are safe even if the riskiest investment banking activities – outside the loop – lose value. That adds costs for banks.

UK financial services minister Andrew Griffith said the planned changes would make the rule more adaptable and reduce the risk of unintended consequences.

“It will improve outcomes for banks and their customers, increase competition and improve the competitiveness of the UK banking sector,” Griffith said, adding that the changes would also boost lending to smaller businesses.

The government intends to introduce secondary legislation – a law created by ministers under powers granted by an Act of Parliament – ​​to implement the reforms in early 2024, with the changes coming into force as soon as they are approved by parliament.

Banking industry body UK Finance has questioned the need for backstop rules, given the major changes made to help bankrupt banks close smoothly without taxpayer help.

‘UNLOCKING BILLION’

He Bank of England (BoE) also presented on Thursday a reform of Solvency II insurance capital rules inherited from the EU.

His reform is seen by the insurance industry and by lawmakers who supported Britain’s exit from the bloc as a “Brexit dividend” to unlock up to 100 billion pounds ($122.01 billion) for investment, although the The EU is also reforming in a similar way Solvency II.

The so-called offsetting adjustment provides capital relief on assets that will generate returns at the right time to cover future payments to policyholders.

This relief, currently valued at around £66bn, would cover a wider range of assets, such as infrastructure under construction and sub-investment grade assets, up to a “prudent” level.

“These proposals aim to promote policyholder protection while enabling the annuity sector to meet its commitments to the government to increase investment in the UK economy,” said Bank of England Deputy Governor Sam Woods, in a statement.

The government overruled the Bank of England to insist on a less onerous discount, and the Bank of England said the cap it had proposed, along with other proposed reforms, would not stop insurers from meeting their stated commitments to “unlock tens of thousands of million pounds for potential investment in implementation.

Woods has urged the government to monitor that insurers will use the capital released from all Solvency II reforms invest in the economy.

The Association of British Insurers said on Thursday its members were committed to using the reforms to allocate £100 billion to “green and good” projects, while protecting policyholders.

The change would take effect on June 30, 2024.

($1 = 0.8196 pounds)

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