Changed British system of governance after Brexit
2023.02.20 09:48
Changed British system of governance after Brexit
By Kristina Sobol
Budrigannews.com – On Monday, Britain laid out its plans for a post-Brexit review of its rules for the 11 trillion pound ($13.2 trillion) asset management industry, with a focus on increasing liquidity following a near meltdown in pension scheme funds in September.
Rules for the UK funds industry were drafted in Brussels up until the time of Britain’s withdrawal from the European Union in 2020.
Due to Britain’s global role in asset management, the Financial Conduct Authority (FCA) makes it clear in its comprehensive review that it will adhere to “strong international standards” despite Brexit.
Due to a lack of liquidity, the industry has not been able to deal with stresses well in recent years in Britain and elsewhere, resulting in global scrutiny.
In the immediate aftermath of Britain’s 2016 referendum to leave the EU, property funds were suspended, and investors sought to withdraw their funds in March 2020 when the economy went into lockdown to combat COVID-19.
When the price of UK government bonds fell in September, so-called liability-driven investment (LDI) funds, which are used by pension plans to guarantee long-term payouts to pensioners, struggled to meet cash calls.
“Liquidity management regulations are contained in the regulatory framework. In a discussion paper on reforming the sector, the FCA stated, “Many of these rules are intended to protect consumers.”
The discussion paper that was put out for public consultation stated, “But the growth of the fund industry means that liquidity management in funds is also relevant to the good functioning of markets.”
It also takes into account how the rules for tokenized or digitalized units in funds could be changed to make assets under management more affordable for small investors.
Kevin Doran, managing director of AJ Bell Investments, stated, “With no cemented new proposals put forward, the next three months should give the industry the time to fly a kite on some Brexit dividend proposals.”
Even though Britain has left the European Union, many of the money market funds, LDI funds, and mutual funds that are available in the UK are listed in EU centers like Dublin and Luxembourg, even though they are managed in London.
The FCA stated that it wants fund managers to follow the EU’s ESMA liquidity stress testing guidelines, which will be incorporated into UK regulations.
The FCA will then concentrate on areas where changes should be prioritized after the public consultation closes in May.
