The International Securities Lending Association (ISLA) published a report, 2024 Securities Lending Horizon Scanner, which provides a high-level overview of key ongoing and expected EU and UK regulatory developments that are likely to have an impact on the industry in the EU and UK over approximately the next 2 years.
There are also spotlight sections on US developments relating to reporting of stock loans and short selling as well as certain EU tax-related developments.
The UK regulatory landscape
The UK is in the process of reforming its financial services regulatory framework, with the aim of creating a ‘Smarter Regulatory Framework’ (SRF) in the wake of Brexit. The Financial Services and Markets Act 2023 (FSMA 2023), enacted on 29 June 2023, enables the revocation of EU-derived financial services and markets legislation.
The finance ministry published its plans for developing the SRF in July 2023, building on the December 2022 ‘Edinburgh Reforms’ package, and prioritizing the repeal and reform of EU-derived regulation by allocating files to different tranches. Alongside the development of the SFR, the UK, similarly to the EU, is also progressing development of ESG and digital regulation, including cyber security ensuring financial systems can withstand disruptions.
The EU regulatory landscape
The EU’s work to strengthen its economic base is reflected via the continuation of revisions to the EU Capital Markets Union with a strong focus this year on competitiveness and EU autonomy. Prudential reforms to implement Basel 3 standards have been agreed, and there is now a renewed prudential focus on non-bank financial institutions (shadow banks).
Ongoing global geopolitical and economic challenges add complexity and have raised concerns over financial stability.
Market infrastructure and settlement efficiency also continues to be a key theme, at the same time, the EU continues to progress various priority ESG and digital-related initiatives, including Sustainability Disclosure Requirements and legislation on digital operational resilience, crypto assets and artificial intelligence.
In addition, the EU is expected to agree retail investment package reforms during 2024 with a focus on consumer protection. However, the clock is ticking with European Parliament elections scheduled for June 2024, which could delay progress of proposals, if not agreed beforehand.