UK financial services firms are dealing with an uncertain economy and ongoing regulatory change. 2023 should see the Financial Conduct Authority (FCA) continuing to focus on the nation’s cost-of-living crisis and vulnerable customers, with an emphasis on preventing consumer harm. The development of technology, innovation, and environmental sustainability is also of increasing importance to UK policymakers. With recent events regarding SVB and other banks, we see an ongoing need by regulators to focus on market stability. It will be interesting to see what impact this may have on the trajectory for the Edinburgh reforms.

In December 2022, UK Chancellor of the Exchequer Jeremy Hunt announced a package of reforms for the UK financial services sector, known as the “Edinburgh Reforms.” The measures build on the government’s vision for an open, sustainable, and technologically-advanced environment for the UK to be the world’s most innovative and competitive global financial services center. The reform makes proposals around:

  • Maintaining and building a competitive marketplace and promoting effective use of capital;
  • Securing the UK’s leadership role in sustainable finance;
  • Ensuring that the regulatory framework supports technology and innovation; and
  • Delivering for consumers and businesses.

The Edinburgh Reforms propose replacing EU financial services law with a new framework bespoke to post-Brexit UK, to help drive growth and competitiveness in the financial service sector. This article breaks the reform into six different sections to highlight items within the package:

  1. Smarter Regulatory Framework
    The UK government has identified financial services to be an integral part of the country’s economic growth. Growth can be accelerated by the free market ideals of increased competition, non-restrictive regulation, and quick responses to market demand or change. Financial services are essential for the smooth functioning of any economy. They provide access to capital, facilitate trade, support change, and facilitate the efficient allocation of resources.The UK’s current framework is EU-centric and shaped in response to the 2008/9 financial crisis. The Future Regulatory Framework (FRF) has been designed by policymakers to create a vision of where the UK should stand in terms of regulation. It is also influenced by the COVID pandemic’s impact in the sector, and the rate of regulatory change needed to enable efficient management of critical situations.

    The primary objectives of the new framework are to be agile, future-proof, and shaped to the specific requirements of UK markets. These objectives aim to position UK financial services advantageously to benefit from new opportunities. The objective of the repeal of existing EU laws and the introduction of the new bill is complex and consequently has been staged into tranches to help manage the transition. The first tranche reviews wholesale markets, listing rules, solvency directives, and securitization rules.

    Wholesale markets: This review focuses on making changes to the UK Markets in Financial Instruments Directive (MiFID) framework.

    Listing rules: The UK Listing Review chaired by Lord Hill is analyzing the current listing regime and recommending new prospectus regulation, with an eye to increasing the number of listed companies in the UK.

    Solvency and securitization
    : The Solvency II Directive is under review, and an effort is under way to improve areas of UK securitization regulation.

  2. Reforms to Banking Regulation
    Another target for simplification is the ring-fencing regime, which was also implemented in reaction to the global financial crisis, with the objective of protecting the retail arms of banks and restricting the riskier banking activities of the investment banking parts of their business. Large projects were carried out across all major UK banks to ensure that markets business and technology ran independently to the retail arms. This became official in January 2019 after several years of prep work by UK institutions. A mix of primary, secondary, and Prudential Regulation Authority (PRA) rulebook changes aims to ensure that the ring-fence regime is enshrined in current regulations. Current criteria for a ring-fenced bank (RFB) include the following:

    • Vital retail services such as taking deposits are positioned in the RFB.
    • An RFB holds core deposits of £25 billion or more.
    • Regional geographical restrictions apply.

    The Edinburgh reforms propose the following major changes:

    • The threshold would increase from £25 billion to £35 billion in retail deposits.
    • Only banking groups with investment banking operations would be subject to the regulation.
    • Geographical restrictions would be removed from the subsidiary arms of RFBs.
    • The list of activities that RFBs are prohibited from undertaking would be reassessed.
  3. Reforms Aimed at Consumers and Businesses
    A review of the Consumer Credit Act 1974 is intended to address “the modern world of credit.” The purpose of the original act was to govern the use of funds related to credit card purchases, personal loans, and motor vehicle finance agreements each year. Proposed changes to the regulations aim to deliver a more outcomes-focused and holistic approach to regulating consumer credit in the UK.A consultation on the information requirements in the Payment Account Regulations (PARs) was due to run until February 17, 2023. The intention is to adjust to accommodate the different EU and UK bank account models. The reform is looking at changes to the regime controlling fee-free banking, where the EU information requirements are not as relevant in the UK. Plans to repeal PRIIPs indicate the replacement disclosure framework will not include the PRIIPs, Key Investor Information Document (KIID), or any new comparable prescriptive disclosure documents, but instead will seek to maintain investor protection, support investment choice, and simultaneously lessen the burden for providing firms. The government is also looking for the regulator to integrate Undertakings for the Collective Investment in Transferable Securities (UCITS) products into the new framework.
  4. Reforms to the Senior Managers and Certification Regime (SMCR)
    Under the Senior Managers and Certification Regime (SMCR, March 7, 2016), senior posts in an RFB are held accountable for regulatory enforcement. These individuals are compelled to ensure that business is conducted according to the rules, with the consumer being the priority when decisions are made. Breach of these rules carries consequences of action taken directly against the individuals. Customer protection is the main objective of the regime.The current regulation enforces the consumer ethical pillars of acting with integrity, cooperating with regulators, and adhering to codes of conduct. It is applicable to any senior management employee within an institution in the scope of the regime. SMCR is often managed in organizations by leveraging external vendors’ solutions or in-house supervisory tracking technology, which maps reporting lines, monitors compliance, and stores attestation validation, plus any supplementary evidence.HM Treasury plans to initiate a review in Q1 2023 into the effectiveness, scope, and proportionality of the SMCR. The market view is that the SMCR approach by firms will not alter much in the short term.The regime’s low enforcement numbers could indicate that it is too burdensome. It is possible that the rules could be relaxed in terms of personal responsibility by senior management, with more emphasis placed on promoting consumer education rather than the current protection and punishment format.
  5. ESG Announcements
    Green finance is an approach to managing money that combines economic profits with environmental protection. It emphasizes financing or investing in projects that yield economic benefits while promoting a sustainable environment (i.e., products such as bonds or bank loans for renewables, reduced carbon transport, or energy efficiency).One of the major challenges to green financing is its current inability to attract sufficient private participation. Investors have little interest in green projects due to challenges with the economic climate and the lower rate of return on green investments. This has led to calls for the government and its agencies to get directly involved in promoting green finance. We may see some response to this in the revised regulatory approach.

    The Edinburgh Reforms announced that the Green Finance Strategy paper previously published in July 2019 will also be reviewed. This could lead to a further drive for financing to support the UK government’s 2050 net zero commitments, including mandatory transition plans across the UK economy.

    The reforms include specific proposals on bringing environmental, social, and governance (ESG) ratings providers into the scope of the UK regulatory perimeter. This is a key step toward ensuring conformity and tackling greenwashing. HM Treasury will also join the industry-led ESG Data and Ratings Code of Conduct Working Group assembled by the FCA, as an observer. This will support the government’s drive to ensure improved transparency and good market conduct.

  6. Reforms Aimed at the Funds Sector
    HM Revenue and Customs is reviewing a proposal to adopt a crypto asset definition for investment manager exemptions similar to that proposed in the Crypto-Asset Reporting Framework (CARF), published by the Organization for Economic Co-operation and Development (OECD) in March 2022. The goal is to continue to create a safe regulatory environment for a crypto asset as its value is pegged against another asset to reduce volatility and to establish a more effective method to utilize such product as a form of payment.UK parliament is also currently debating the Financial Services and Markets Bill and calling for stronger crypto regulation following the events in the crypto market in 2022. The UK government plans to publish a report for broader crypto regulation in the coming weeks.
  7. Other Reforms
    The government is looking to support innovation and leadership in emerging areas of finance and has rolled out efforts in the following areas:

    • Financial market infrastructure sandbox: Planned for 2023, this framework will be set out in the Financial Services and Markets Bill, with a view to promoting innovation and boosting the leadership credentials of the UK financial market.
    • Stable coins: Regulators will be encouraging digital innovation and development of platforms for stable coins used for payments, among other crypto asset activities.
    • Technology working paper: In the coming weeks, the Bank of England will release a paper setting out the technology requirements for a UK central bank digital currency.


The UK risk and regulatory landscapes continue to evolve at a rapid pace and require significant focus to meet regulatory expectations, with enormous implications for organizations’ design of their future operating models. In a growing number of jurisdictions, organizations will have no choice but to move quickly to implement new regulatory frameworks around operations, technology, and finance in relation to the revised regimes.

How Treliant Can Help

Treliant is a financial services and regulatory compliance consulting firm that can help financial services organizations navigate the complexities of risk and regulatory changes. Our firm can assist organizations in the following ways:

  • Regulatory guidance: Treliant can provide guidance and support to financial services organizations on the interpretation and implementation of regulatory changes.
  • Risk management: Our firm can help financial services organizations identify and manage the risks associated with large-scale changes, including operational, reputational, and financial risks.
  • Digital transformation: Treliant can offer technology enablement to ensure rapid and sustained improvement within your organization.
  • Data solutions: Our firm can develop intelligent design of enterprise data solutions, allowing for the efficient build-out of regulatory, risk, and finance platforms.


Paul Walsh

Paul Walsh is Senior Managing Director, Capital Markets Solutions at Treliant. He is an accomplished change leader, with more than 25 years’ experience and a proven track record of delivering large-scale transformation programs across business and technology in complex global banking environments. He has delivered a wide range of initiatives…