Bank executives are making a final attempt to persuade Britain’s Treasury to reconsider its choice of former U.S. financial regulator Michael Hsu for the role of chief regulator of British banks and insurers, according to sources familiar with the matter.
This lobbying effort underscores how crucial the banking sector views the appointment of Sam Woods’ successor as head of the Bank of England’s Prudential Regulation Authority (PRA). Woods has been instrumental in shaping financial regulations since the crisis in 2008.
Some key figures in London are advocating for Catherine Braddick to take on the role. She has been with Barclays for four years, previously working at the Bank of England and various public sector roles for two decades.
The internal contender is David Bailey, who currently holds the position of executive director of prudential policy at the PRA. While Rachel Reeves is considered well-qualified, there seems to be a preference for an external candidate to align with the government’s aim of promoting growth-oriented regulations.
Michael Hsu, who stepped down from his role as head of the Office of the Comptroller of the Currency about a year ago, is among the leading candidates to fill Woods’ position when his term ends in June. Hsu, a former Federal Reserve official, would be the first American to assume this position and has often cautioned against easing banking regulations, as he believes it could lead to another financial crisis.
Described as a “capital hawk” by a financial executive, it’s clear the industry is not in favor of Hsu’s appointment. Some American banks, however, seem more supportive.
Additionally, Hsu has raised alarms about cryptocurrencies, likening them to the problematic financial products that contributed to the 2008 crash, which contrasts with banks’ current interest in embracing such assets.
One source mentioned that appointing Hsu could potentially create tensions between the UK and the Trump administration, given that Hsu was appointed under Biden.
Currently, banks are optimistic about a long-overdue restructuring in the eyes of regulators, as the U.S. pushes ahead with deregulation following the 2008 crisis.
Officials from the Trump administration are working to relax banking regulations and facilitate lending, with lenders in the Atlantic region hoping for a similar approach from their home regulators.
In Britain, bankers are quietly pleased about moving forward from previous frustrations, particularly after Lucy Rigby, the city secretary, noted last year that, following the Autumn Budget, there were no tax hikes on banks and a discussion on deregulation to encourage economic growth.
The PRA, a part of the BoE, oversees the UK’s main banks and insurance providers and has gained special powers to create regulations after leaving the EU.
Woods has been closely associated with many post-crisis regulations, including some that require banks to wind down retail operations and high-risk investment banking activities. The government is reviewing these rules, and several banks are lobbying for their repeal.
A panel of experts from the Treasury recently met with potential candidates for the PRA’s head role. An announcement regarding Woods’ replacement is expected soon.
Beyond Braddick, Bailey, and Hsu, the committee also looked at Adrian Harris, another former U.S. regulator who resigned from the New York Department of Financial Services, although he is no longer considered a candidate.
Officials from the Treasury, the central bank, as well as Bailey, Braddick, Harris, and Hsu have all chosen not to comment on the matter.
