Financial regulators have been ordered to encourage more risk-taking across the City, raising concerns that a Labor government is at risk of watering down regulations meant to avoid a repeat of the financial crisis.
officially 'Remittance' letter to the Financial Conduct Authority (FCA) President Nikhil Rati and Prime Minister Rachel Reeves say regulations aimed at protecting consumers should get in the way of “sensible risk-taking” by the broader financial sector, including investors, banks, asset managers and insurers. He said it was not.
The mandate, which will be sent to the regulator once in Parliament to outline the government's priorities, will see the FCA work to support the growth and competitiveness of the city's businesses as part of new responsibilities given to the watchdog last year. explained that it should be accelerated.
“We recognize that there are difficult trade-offs,” the prime minister's letter said. “At the end of the day, we have to trust the systems we have in place to manage the impact when something goes wrong, so that problems with one company can reduce risks more broadly. It does not create or lead to over-correction in the future.”
As part of the response to the Prime Ministerthe FCA states: “Regulation is part of the picture when it comes to growth. We know there is still much work to do, but we are committed to playing our part.”
Reeves told City bankers gathered at the annual Mansion House dinner that regulations put in place to protect the economy after the 2007-2008 global financial crisis had gone “too far,” campaigning. This came hours after the family said concerns had grown.
Jesse Griffiths, chief executive of one of Britain's leading charities, said: “A strong financial system is essential for sustainable growth, but it is wrong to make the growth of the financial sector an end in itself.” . Finance Innovation Lab.
“There is ample evidence that this will lead to a focus on the needs of international capital rather than domestic companies. We need to heed the lessons of the financial crisis,” Mr Griffiths added.
Labour's lax regulation of the city was blamed for contributing to the collapse of the Royal Bank of Scotland in 2008, which worsened the global financial crisis. The government was forced to spend tens of billions of pounds on a series of bank bailouts, leading to years of recession and austerity across the UK.
The EU and UK governments have since tightened regulations to curb risk-taking and avoid a repeat of the financial crisis.
But Conservative ministers began dismantling some of these protections after the coronavirus pandemic. These include reintroducing competitiveness targets for regulators, which critics warned could lead to the same light-touch approach that sparked the 2008 crisis.
The Labor government continues to seek post-crisis reforms. This includes reforms to bank employee bonus deferral rules, which could allow bank employees to get paid three years earlier, as well as ensuring that city managers are qualified for their jobs. This includes replacing certification systems that ensure that
The Treasury also plans to reform ring-fencing rules, which protect consumer deposits by separating a financial institution's retail and investment banking operations, and ease regulations on small banks.
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Economist Sir John Kay said a Labor government needed to ensure that reforms did not just serve City bankers. “Our goal should be for the financial sector to serve the needs of the non-financial economy, not the needs of people in the financial economy,” Kay told the Guardian. “And in what is being said, for example in the Mansion House speech last night, these things seem to be mixed up and mixed up.”
The Treasury said: “Robust regulatory standards are fundamental to the attractiveness of the UK market and the stability and soundness of the UK financial system is a key priority for the Government.”
“The UK will continue to be a world leader in promoting high industry standards, while ensuring that regulation supports growth so everyone can live better.”
Alongside new instructions to city regulators, the Chancellor announced updated powers for the Bank of England's Monetary Policy Committee (MPC).
Although the inflation target remains at 2%, Reeves, himself a former central bank economist, has tweaked the government's economic policy explanation, calling for “broad-based and resilient growth on strong and secure foundations.” ” was promoted.
The phrase 'widely based' is thought to refer to the need to rebalance the UK economy so that growth is no longer concentrated in the south-east.
