HM Government has introduced a Bill into Parliament that represents its first step towards a regulatory regime for the UK’s financial services sector outside the European Union. The aim is to ensure a smooth transition to a British rulebook and set up a regulatory regime that makes the UK more competitive in financial services.

Highlights include further progress towards financial stability with the implementation of the remaining Third Basel Accord ('Basel III') standards, a new prudential regime for investment firms and powers to help the Financial Conduct Authority oversee an orderly transition away from the London Interbank Offered Rate or LIBOR.

Smaller measures include ways of improving the functioning of the Packaged Retail and Insurance-based Investment Products Regulation (also lifted from the EU) and higher penalties for market abuse. Parliament has not yet decided on the timing of the Bill’s progression. HM Government will publish something about the Gibraltar Authorisation Regime and the Overseas Funds Regime shortly.

Summary of the measures

• Implementation of the remaining 'Basel III' standards. This measure will facilitate updates to the UK's prudential regulatory regime by bringing the remaining international banking standards into force.
• Investment Firms’ Prudential Regime (IFPR). This is designed to let the Government impose a better prudential set of rules on investment firms.
• LIBOR transition. This measure will clarify and extend the set of powers that the FCA can use to stop financial firms from using the London Interbank Offered Rate.
• Benchmarks: extension of third-country transitional period.    This measure will extend the transitional period for benchmarks that lie outside the EU between the end of 2022 and the end of 2025. The Government says, rather grandly, that this is a measure that "affects the stability of financial affairs." It hopes that this will protect 'users' - presumably British people who use various British things - who lose access to certain markets.
• The Overseas Funds Regime. This measure will introduce new 'equivalence' regimes for retail investment funds and money market funds and will simplify processes that help investment funds that are domiciled overseas to market their services to consumers in the UK.
• The Gibraltar Authorisation Regime. This is a clause designed to give financial service firms in the UK and Gibraltar long-term access to each other's markets "on the basis of alignment and co-operation," bearing in mind that the UK and Gibraltar have now left the EU.
• The Markets in Financial Instruments Regulation (MiFIR). This piece of EU law, according to the Government, updates the regime which regulates the services and activities of non-EU firms in the UK. The Bill, according to HM Government, seeks to ensure that the FCA can oversee firms that might register in accordance with the regime.
• Amendments to the European Union's Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation. The Government hopes that this measure will improve the way in which the onshored EU PRIIPs Regulation works by enabling the FCA to make clarificatory rules regarding its scope and by removing all references to performance scenarios. It will also enable HM Treasury (which, somewhat bizarrely, is now trying to style itself as 'HMT') to extend the exemption currently in place for Undertakings for the Collective Investment in Transferable Securities (UCITS) funds.
• Amendments to the Market Abuse Regulation. This measure will make two amendments to that EU regulation to bolster the effectiveness of the regime while reducing some of the administrative burdens on issuers.
• More onerous criminal penalties for market abuse. The idea is to increase the maximum prison sentence for market abuse from 7 to 10 years.
• More beneficial ownership transparency for trusts. The Bill attempts to 'clarify' the Government’s ability to enforce and make changes to "extra-territorial trust registration powers."
• Completion of the implementation of the European Market Infrastructure Regulation (EMIR Refit). The Government wants to ensure that clearing members and clients that offer clearing services do so on a fair, reasonable, non-discriminatory and transparent (FRANDT) basis, to improve trade repository data quality and to make it easier for firms to move from one trade repository to another.
• Amendments to the Banking Act in relation to the Financial Collateral Arrangement Regulations (FCARs).
• Cancellation of the authorisation of firms. The idea here is to streamline the FCA’s process for removing a firm’s authorisation and taking it off the public register, the better to reduce the risk of fraud.
• Term of the FCA chief executive. This clause aims to make the appointment of the FCA's CEO subject to a fixed, once-renewable, five-year term.
• Statutory Debt Repayment Plan (SDRP). The idea is to build on existing law to enable the Government to impose these plans on creditors and to provide for a charging mechanism by which creditors will contribute to the funding of the Breathing Space Scheme (both Breathing Space and the SDRP).
• "Help to Save Successor Accounts." When a so-called Help to Save account matures and the account holder has not transferred it elsewhere, the Government wants to ensure that the balance can be transferred into a standard NS&I savings account automatically, keeping the funds safe until the owner decides what he wants to do with the money.