The chapter of this year's Budget on financial stability explains the actions Government has taken over the last couple of years, both generally and in relation to specific financial institutions. Among its priority actions for the future are:
Financial stability and regulatory reform
- a review of the covered bond market regime;
- its paper describing its view on the future of financial markets regulation (due "before the summer");
- publishing the Walker review on corporate governance and related issues (due in the summer with conclusions in the autumn);
- reviewing arrangements where an investment bank becomes insolvent;
- implementing remaining parts of the Banking Act 2009;
- consulting on widening FSCS scope;
- pressing for better EU crisis management and early intervention tools;
- driving better information for retail customers;
- improving competition in the banking sector (but not by introducing Glass-Steagall type measures, rather by reforming capital and liquidity regimes);
- putting forward proposals to encourage diversity of ownership of financial institutions, particularly mutuals; and
- consulting on the best way to achieve effective macro-prudential supervision.
Tax law changes
- investment funds: finalising legislation to provide more favourable or more certain tax treatment to elements of investment fund business:
- Tax-Elected Funds for Authorised Investment Funds;
- certainty on whether fund investments will be treated as trading or investment transactions for tax purposes; and
- a new regime for Investment Trust Companies.
IMA welcomed the confirmation of the new tax measures, which also included plans to reform taxation in offshore funds.
- anti-avoidance: the Chancellor announced "a series of measures to protect the tax system from abuse" under the headings of:
- developing the disclosure of avoidance schemes regime;
- proposals to counter avoidance using financial products;
- foreign exchange targeted anti-avoidance rule;
- exploitation of the double tax relief and manufactured overseas dividend rules; and
- structured foreign exchange arrangements (often described as overhedging or underhedging).
- trading carbon: under the heading "building a low-carbon recovery", the Government announced a series of measures some of which may impact the markets in carbon trading (Certified Emissions Reductions (CERs)) and in Renewable Obligations Certificates (RUCs).
The report also describes the Government's reactions to the de Larosiere and G20 conclusions and explains the areas in which it will take action in response to these and the Turner Review. The paper includes detail of recommendations and sets out the Government's views on issues such as remuneration practices within banks. (Source: Press Notice 1, Budget Chapter 3, BN23 and 26 and IMA Press Release)