Uncertainty over UK announcement of Big Bang 2.0 financial services reforms

There is now uncertainty over when the UK will unveil its post-Brexit changes to EU financial services regulations amid the current government turmoil.

The Treasury said last month that former chancellor Kwasi Kwarteng would announce the long-awaited reforms, which will include changing the EU’s Solvency II directive on insurance firms, in October.

This target may now slip and there is internal Treasury discussion over whether to outline the changes in new chancellor Jeremy Hunt’s Medium Term Fiscal Plan on 31 October or at a later date.

Hunt has indicated that the fiscal statement will include a series of spending cuts to reduce the government’s long-term debt, after also cancelling a series of tax cuts today.

The financial services reforms – which former chancellors Rishi Sunak and Kwasi Kwarteng both said would herald a “Big Bang 2.0” for the City – have been touted as some of the largest potential benefits of Brexit by Tory Leavers.

A Treasury source told City A.M. that the past week’s upheaval, which has seen Jeremy Hunt appointed as chancellor and then completely overturn the UK’s economic policy, means finding a date for the announcement has not been “an immediate priority”.

They stressed the department would outline “ambitious reforms in the coming weeks” and that a date will be given “shortly”.

It comes as a broader bonfire of business and planning regulations that was expected this month has also been delayed due to cabinet disagreements.

The government has estimated that easing Solvency II, which forces insurance firms to hold certain amounts of capital to withstand financial shocks, will unleash tens of billions of investment into the UK economy.

The package is expected to also include tweaks to the EU’s MiFID II directive, which forces investment firms into greater transparency when reporting transactions and payments.

The government also introduced the Financial Services and Markets Bill to parliament earlier this year.

The bill provides a mechanism to replace retained EU financial services regulations and creates a new directive to force British regulators to consider the City’s growth and competitiveness when making decisions.

Ministers are planning on amending the bill to allow the government to overturn decisions made by independent financial regulators.

City minister Andrew Griffith told a Westminster committee last week that the new call-in power would only be used “sparingly” in the face of concerns that it will reduce the independence of the UK’s regulators.

“We want operationally independent regulators, we do not want ministers interfering in the day-to-day of regulatory decisions,” he said.

“But it’s not uncommon … to have what I would term as a safety valve. A public policy safety valve that says there will occasionally – or there could, we can’t preclude the possibility – that there may be some matters of great public policy that this committee, parliament, as directed by ministers, may want to opine on.”