Financial Services policy briefing: October

Throughout the pandemic, the financial services industry has had a key role to play in supporting companies across various sectors and regions. The resilience and agility of firms, alongside the government interventions, has avoided a larger impact to the UK economy.

As we look ahead to the winter months, the CBI will be focused on engaging members in key consultations and working groups and in reviewing the long-term implications of the pandemic for the sector.

Winter Economic Plan: extension to the government backed loans

In his Winter Economic Plan, the Chancellor announced key measures to address the challenges foreseen for the next 6 months and the long-term change to our economy. These included the introduction of a new wage support scheme starting in November, extension of the government loan schemes, tax deferrals and targeted VAT support for hospitality and tourism.

On the government loan schemes, the new measures on the bounce back loans and Coronavirus Business Interruption Loan scheme (CBILs) look to address cashflow concerns.

In particular, the bounce back loans will now benefit from more time and flexibility to repay with ‘pay as you grow’. These loans can be extended from 6 to 10 years and businesses struggling will be able to choose interest-only payments or apply to suspend repayments up to 6 months. Crucially, this will not impact their credit rating.

On CBILs, the government guarantee was extended for up to 10 years, giving more time to repay.

All loans schemes are open to applications until the end of November and a new successor to the loan scheme is expected to be launched in the new year.

An analysis of the other announcements in the Winter Plan can be accessed here.

Fintech Strategic Review

In August, the Treasury announced the terms of reference of the Fintech Strategic Review. The Review will identify priority areas to support the UK fintech sector, including how the UK can continue to foster innovation; maintain an ecosystem that supports growing firms; and promote the integration of new technologies across financial services. The Review will be carried out independently and will report to HM Treasury with recommendations in 2021.

The CBI is part of the Policy and Regulation and the Skills and Talent workstreams, and our FS team will lead a written submission to the review in the coming months. If you would like to get involved in shaping our submission, please get in touch with Ana Gallego.

Payments working group

The CBI’s FS team has created a working group to respond to HMT’s call for evidence on the Payments Landscape Review, and to give industry representatives a forum to discuss priorities for the industry in the coming years.

We believe that the CBI’s role in this is to bring in the whole economy voice to the debate. The CBI sees the UK’s payment systems as a central pillar of the UK’s infrastructure, enabling growth in the wider economy, and can act as a facilitator between the payments community, regulators and businesses across all sectors.

The CBI will submit a response to the call for evidence next week, but if you would like to discuss the remit of this group or the payments landscape, please get in touch.

Insurance working group

The CBI has established a monthly insurance working group to discuss the role of insurance in economic recovery. If you are interested in joining this group, please get in touch with Ana Gallego or Chris Wilford.

Sustainable finance

Sustainable finance remains a key CBI priority in 2020. What does stimulating a sustainable recovery look like through smarter regulation and clear policy for financial services?

Government and regulators need to provide the right incentives, stability and clarity on definitions, and develop smarter regulation that lifts investor confidence and supports accurate data to drive green investment. This includes work that champions financial services as a force for good and trusted partner, whilst encouraging businesses of all sizes to be bold and ambitious.

With many businesses now getting to grips with climate-related risks and green finance, work from the Bank of England and FCA’s Climate Financial Risk Forum provides a valuable framework for action. As part of this conversation, the CBI has held a series of roundtables, including with Christopher Woolard, Interim CEO of the FCA and Sarah Breeden, Executive Director, UK Deposit Takers Supervision at the Bank of England.

The CBI is now working on the next stage of our sustainable finance project, with a social and governance paper to develop this position given urgency in the wake of the pandemic. We are also feeding in at an EU level via BusinessEurope into the consultation on the Sustainable Finance Strategy. If you would like to find out more, email Chris Wilford.

Brexit

It is critical that the FS firms complete their operational restructuring programmes to continue to be able to best serve and support their clients through the transition. The CBI continues to work with members and sector bodies, as well as with sister associations across Europe, on the importance of securing a deal.

There are still a number of cliff-edge issues that will require action by regulators and policymakers to ensure that FS firms have the facility to do this. Fundamental to a smooth transition is the granting and determination of reciprocal third-country equivalence. The impact of the pandemic crisis on corporates and the wider economy has made this even more important. If you would like to find out more please email Flora Hamilton.