Bank of England and City square off over new government powers


© Reuters. FILE PHOTO: A general view of the Bank of England (BoE) building in London, Britain, August 4, 2022. REUTERS/Maja Smiejkowska


By Huw Jones

LONDON (Reuters) – Government powers to force UK regulators to scrap financial rules could harm the City’s global clout, a senior Bank of England official said on Wednesday as the sector called for watchdogs to develop a more “commercial mindset”.

While Britain remains Europe’s biggest financial sector after its exit from the European Union, banks are keen for regulators to help boost the City’s global competitiveness.

Britain’s finance ministry will use a financial services and markets bill now before parliament to give itself powers to intervene in financial rulemaking, when in the public interest.

City Minister Andrew Griffith has said there would be no day-to-day interference in watchdogs, but the wording of the new power has yet to be made public.

Forcing regulators to make or amend rules which come under their legal objectives may be seen as undermining operational independence, BoE executive director Victoria Saporta told a committee of lawmakers scrutinising the bill.

“It could have adverse implications for our international standing and therefore ultimately competitiveness, but a formulation that is squarely outside our objective, for example for matters of national security… could be a different matter if tightly done,” Saporta said.

Emma Reynolds, managing director at TheCityUK, which promotes UK financial services abroad, said London is losing ground to New York in company listings, and regulators were taking too long to authorise senior hires at financial firms.

If tightly defined and used as a matter of last resort, powers of intervention could be a “very reasonable instrument”, Reynolds said.

“There is room for improvement in having a commercial mindset in the regulators,” she added.

David Postings, chief executive of UK Finance, a banking lobby, said powers to override regulators should be tightly drawn and used sparingly.

“It’s a very difficult trick to pull off, but we should be able to do it,” Postings said.

Before he was sacked as finance minister this month, Kwasi Kwarteng promised a deregulatory “Big Bang 2.0” that goes further than the bill in boosting City competitiveness, raising the prospect of further pressure on watchdogs.

A source at the ministry confirmed this was still the plan under new finance minister Jeremy Hunt.

“We are committed to making our financial services sector one of the most open, well-regulated and technologically advanced markets in the world, and have committed to set out ambitious reforms in the coming weeks. We will formally announce a date shortly,” the source said.