Chancellor sets out ambition for future of UK financial services

Following the UK’s departure from the EU, the government’s approach to financial services will be guided by what is right for the UK and one of its most productive and innovative sectors, the Chancellor outlined in his address to the House on Monday. 

Hailing the start of a new chapter for UK financial services, the Chancellor set out plans to bolster the dynamism, openness and competitiveness of the sector – including issuing the UK’s first-ever Sovereign Green Bond, becoming the first country in the world to make TCFD-aligned disclosures mandatory, reviewing the UK’s listings regime to attract the most innovative firms, and leading the global conversation on new technologies like stablecoins and Central Bank Digital Currencies.

"We are starting a new chapter in the history of financial services and renewing the UK’s position as the world’s pre-eminent financial centre. By taking as many equivalence decisions as we can in the absence of clarity from the EU, we’re doing what’s right for the UK and providing firms with certainty and stability," said Rishi Sunak, Chancellor of the Exchequer.

"Our plans will ensure the UK moves forward as an open, attractive and well-regulated market, and continues to lead the world in pioneering new technologies and shifting finance towards a net zero future."

Positioning the UK at the forefront of green finance

Recognising that financial services are a critical enabler in the drive for net zero, the Chancellor outlined new proposals to support sustainable financial flows and extend the UK’s global leadership in green finance ahead of hosting COP26.

To help the UK meet its 2050 net zero target and other environmental objectives, the government will issue its first Sovereign Green Bond in 2021 subject to market conditions – and intends to follow up with a series of further issuances to meet growing investor demand for these instruments. These bonds will help finance projects that will tackle climate change, finance much-needed infrastructure investment and create green jobs across the country.

The Chancellor also announced the introduction of more robust environmental disclosure standards so that investors and businesses can better understand the material financial impacts of their exposure to climate change, price climate-related risks more accurately, and support the greening of the UK economy.

The UK will also become the first country in the world to make Task Force on Climate-related Financial Disclosures (TCFD) aligned disclosures fully mandatory across the economy by 2025, going beyond the ‘comply or explain’ approach.

Moreover, the UK will implement a green taxonomy – a common framework for determining which activities can be defined as environmentally sustainable – which will improve understanding of the impact of firms’ activities and investments on the environment and support our transition to a sustainable economy.

Extending the UK’s leadership in financial technology

The UK will also look to remain at the forefront of technological innovation.

To harness the potential benefits of stablecoins, whilst managing risks to consumers and financial stability, the government will propose a regulatory approach for relevant stablecoin initiatives that ensures they meet the same minimum standards we expect of other payment methods.

And as the UK takes a leading role in the global conversation on Central Bank Digital Currencies, the Chancellor welcomed work by HM Treasury and the Bank of England to consider whether and how central banks can issue their own digital currencies as a complement to cash.

Equivalence and openness

Equivalence is one of the UK’s one of the central mechanisms for managing cross-border financial services activity with the EU and beyond.

To provide certainty and reassurance to firms and international partners, the Chancellor on Monday announced the publication of a guidance document setting out the UK’s approach to equivalence with overseas jurisdictions – a technical outcomes-based approach that prioritises stability, openness and transparency.

The Chancellor also announced the UK will be granting a package of equivalence decisions to the EU and EEA member states.

The UK’s approach to regulation outside the EU

The government is undertaking a series of reviews to ensure regulation enhances the UK’s attractiveness to business and position as global financial hub.

As part of this, the Chancellor has set out plans to boost the number of new companies who want to list in the UK. This includes establishing a taskforce that will propose reforms to the UK listings regime to attract the most innovative and successful firms and help companies access the finance they need to grow.

To further enhance the UK’s attractiveness for asset management, the government will soon publish a consultation on reforming the UK’s funds regime.

And to encourage investment in long-term illiquid assets, such as infrastructure and venture capital, the Chancellor announced his ambition to have the UK’s first Long-Term Asset Fund launch within a year.