The announcement of the next chapter for UK financial services in Edinburgh was a deliberate and pointed move. Edinburgh and Glasgow represent the two largest UK financial services hubs outside London and are home to some of the UK's most iconic financial institutions. The message behind the choice of location was echoed in the announcement itself; the Edinburgh Reforms are intended to be felt "across all four nations of the UK" with Scotland's role "critical" to maintaining the UK's status as "the global benchmark for regulation".

The Edinburgh Reforms promise to "create jobs, support businesses and power growth". But mere months after the reforms were announced, the financial services sector, in particular banking, finds itself navigating potentially choppy waters with failures in both the US and Europe.

The collapse of Silicon Valley Bank (SVB) and demise of Credit Suisse represent a timely reminder as to how delicately balanced the world's financial services sector is, and emphasise the importance of high regulatory standards, as the Chancellor recognised when announcing the Edinburgh Reforms package. Whilst some argue for relaxing the regulatory burden on the financial services sector, almost all commentators recognise ensuring high standards of regulation is critical to maintaining financial stability to avoid a repeat of the 2008 financial crisis.

Adrian Yeo is Counsel, Financial Services and Market Regulations, Dentons

But financial services is a dynamic economic sector experiencing constant evolution and technological innovation. This dynamism means constant questioning of the appropriateness of regulatory requirements and where the standard should be set.

One obvious example is the possible reform announced by the Chancellor of the ring-fencing regime, separating big banks' retail and trading divisions. The possibility of reforms was raised in an independent review that found over time, the benefits of ring-fencing would likely reduce as the resolution regime for banks, designed to ensure the public does not have to bail-out the banks, is embedded. However, architects of the ring-fencing regime have suggested removing ring-fencing would pose a very great risk to financial stability.

Commentators suggest that recent events show resolvability and ring-fencing may not be substitutes for one another. A bank's resolvability is not perpetual and depends on many factors at any given time.

The government's Call for Evidence on the longer-term future of ring-fencing opened just before events at SVB and Credit Suisse. At a high level, it presents three basic options: (1) retain the ring-fencing regime, (2) reform it, or (3) disapply it entirely for some, or all, banks. It will be interesting to see how the evidence unfolds, but it already feels like there will be powerful views for and against each option, which might be informed by recent events.

Individuals might wonder why this is relevant to them. The answer comes in many forms: the importance of financial services, and the banking sector in particular, to the wider economy, which in 2008 required government intervention to stabilise the sector; regulatory changes can affect the cost of financial services firms’ offerings to consumers, costs which often get passed onto consumers or determine whether a firm will even offer services; and changes in the regulatory environment can directly affect those people who work at the institutions.

Accordingly, whilst it might not seem like the most exciting subject matter, the reform of financial services is something that affects us all, and which we should follow with interest.

Adrian Yeo is Counsel, Financial Services and Market Regulations, Dentons

The reform of financial services affects us all - Adrian Yeo