The Edinburgh Reforms

Early in December last year, the Chancellor set out a package of regulatory and tax reforms, totally over 30 new policy initiatives, to support the Government’s post-Brexit vision of the UK continuing to be one of the world’s greatest financial centres. The Edinburgh Reforms, as the announcements have been dubbed, were backed by the Prime Minister’s New Year speech last week where he commented on addressing the need to “ensure the regulatory system is agile and pro-innovation. Making sure entrepreneurial and fast-growing companies get the financing they need to expand and spread a culture of creative thinking and doing things differently across every part of the UK.”

A seismic shift

The Edinburgh Reforms are one of the most substantial undertakings of regulatory reform in recent years. In Sunak’s speech, he also promised “Increasing public funding in R&D to £20bn to enhance our world leading strengths in AI, life sciences, quantum, fintech, and green technology” continuing by highlighting the importance of “Seizing the opportunities of Brexit to ensure our regulatory system is agile and pro-innovation.”

Firms must take time to research, digest and review the Government’s approach of ‘tranching’, where they have set out in sequence the highest priority undertakings for the reforms as 2023 progresses. A key consideration at the heart of this for alternative investment firms must be assessing and planning technology strategy.

A digitised approach to working with the FCA and PRA

With little tangible information available at this early stage of the reforms, firms must measure how they prepare for future regulatory changes, be they more or less burdensome than current regulation. What we can be sure of is that the UK intends to move to a much more highly digitised approach to working with the FCA and PRA, and therefore regulated firms themselves.

An opportunity to do more with less

The industry has been exploring the potential advantages that digital transformation has created for back and middle office operations. Up until now, this process has remained complex in terms of being a mixture of in-house legacy systems, and outsourced service providers supporting fund selection, distribution and often elements of reporting too. However, thanks to digital transformation, this legacy process has started to embrace digital solutions that offer firms greater control and transparency when it comes to fund operations. There is often a lack of framework readily available as a good starting point, which can be damaging to implementing new data management, can create inefficiencies and be costly and time consuming. In order to overcome these challenges, firms need to consider how best to implement a robust IT framework and data strategy in which they can fully understand all their information with a 360 degree view, whilst operating with the highest levels of security and also being compliant to the required level within institutional banking regulatory requirements.

What is the next challenge?

The greatest challenge that firms now face is making decisions to establish the framework that is needed to implement the reforms in a way that provides a long term solution for regulatory reform.

We’ll continue to follow the impact of the Edinburg Reforms, so check back in again for our views and more on how this will impact the technology decisions you make.