As the UK finance sector faces increasing competition from Wall Street, industry leaders are calling for 'bold' reforms to revamp the existing financial rulebook. This push for change comes in anticipation of Chancellor Rachel Reeves' first Mansion House speech on November 13, 2024, where she is expected to outline her government's strategy to enhance national prosperity and bolster industry prospects amidst a potential economic boom under president-elect Donald Trump [f6e11d57].
Reeves' government is particularly focused on addressing the outdated banking and finance framework, as highlighted by the think-tank New Financial. The current system is seen as inadequate to support the growth ambitions of UK firms, especially as they compete against a resurgent Wall Street [f6e11d57]. In her speech, Reeves is likely to propose reforms aimed at improving consumer trust mechanisms and pension regulations, which could see pension schemes amassing up to £1 trillion over the next decade [f6e11d57].
In parallel, on November 14, 2024, the Managed Funds Association (MFA) urged Trump’s transition team to review private fund regulations deemed 'harmful' and to maintain 'pro-growth tax policies.' MFA President and CEO Bryan Corbett criticized the current SEC agenda, advocating for reforms to support alternative assets as economic growth drivers. The letter emphasized the importance of preserving tax provisions that incentivize long-term investments, particularly the treatment of carried interest as a long-term capital gain [9c4bd811].
Recent analysis indicates that Trump’s deregulatory agenda is expected to significantly benefit US banks, with promised tax cuts and a boom in oil drilling likely to boost profits. In September, US banking lobbyists influenced the dilution of Basel III rules on capital and liquidity, and expectations are high that these diluted rules will be further eliminated under Trump's administration [81aea42b]. Trump aims to 'slash' regulations, easing mergers and acquisitions for banks, which could widen the investability gap between US and UK financial institutions [81aea42b].
Wall Street is particularly optimistic about a resurgence in mergers and acquisitions (M&A) in 2024, contingent on the new Trump administration implementing lower interest rates and reducing regulatory scrutiny. After a significant drop in deal values by 23% in 2023 compared to pre-pandemic levels, with the number of deals down 20%, analysts believe a more favorable regulatory environment could revive corporate dealmaking [3dcd6eba].
Meanwhile, UK banks are grappling with potential compensation costs of £23 billion due to the car finance scandal, further complicating their competitive stance [81aea42b]. As Reeves prepares for her address, the balance between fostering a competitive financial environment and ensuring regulatory oversight will be crucial. The implications of her proposed reforms for both the finance sector and the broader economy will be closely watched by investors and policymakers alike [f6e11d57]. The lobbying efforts by private funds for SEC reforms signal a broader trend of seeking deregulation under the incoming Republican administration, which has pledged to reduce regulations and taxes [9c4bd811].