Market Spotlight: UK Govt Announces Banking Reforms Package

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UK Govt To Reverse 2008 Banking ReformsIn a clear sign that the UK government is agonising over the loss of London’s status as the financial capital of Europe, cabinet today announced a new package of reforms aimed at boosting growth in the financial sector. The package of 30 measures, named ‘The Edinburgh Reforms’ essentially a comprise a vast swathe of measures which amount to deregulation and a reversal of many of the safe-guards and restrictions put in place following the GFC in 2008.'Brexit Freedoms' Announcing the measures, UK chancellor Jeremy Hunt said “The Edinburgh Reforms seize on our Brexit freedoms to deliver an agile and home-grown regulatory regime that works in the interest of British people and our businesses.” Hunt went on to say “ we will go further – delivering reform of burdensome EU laws that choke off growth in other industries such as digital technology and life sciences.”With Paris having recently overtaken London as the largest stock exchange in Europe and with an increasing amount of banks relocating staff away from London back to Italy, France and Germany, the UK government hopes to alter the narrative.Fears of DeregulationAs expected, however, the reforms are immediately drawing opposition with many fearing a return to the conditions which led to the GFC. John Vickers who previously headed the Independent Commission on Banking commented that “special favouring of the financial services sector … could be detrimental to it, as we all saw 15 years ago.”Technical ViewsFTSE 350The recent rally in the index saw the market breaking above the bearish trend line from YTD highs. However, price stalled into a test of the 4199.76 level and has since reversed lower, trading back below the trend line for now. While back below the trend line, the focus is on a further correction towards support at the 4035.83 level next.

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