The government of Rishi Sunak returns in particular to the measures guaranteeing the separation of retail and investment activities within a bank.
The British government announced a series of post-Brexit reforms on Friday designed to boost the growth of the country’s powerful financial sector, but says it has not forgotten the lessons of the 2008 financial crisis, amid fears of “far-reaching deregulation”. .
“The UK has always had and will always have an incredibly respected and robust regulatory system for the financial services sector” although it “is also important to ensure that the sector is competitive”, hammered the first Friday Minister Rishi Sunak.
Chancellor of the Exchequer Jeremy Hunt traveled to Edinburgh, Scotland, on Friday to explain to industry representatives “thirty regulatory reforms to secure the UK’s place as the world’s leading financial centre”.
In particular, he discusses certain measures put in place in the wake of the 2008 crisis, in particular those guaranteeing the separation of retail and investment activities within a bank (“ringfencing”), which aimed to avoid conflicts of interest and protecting consumers’ money.
London intends to extract from these constraints “the banks which have no major investment activity”.
“We must be careful not to unlearn the lessons of 2008, but at the same time recognize that banks today have much stronger balance sheets” than during the financial crisis, Hunt argued on Friday.
It is “far-reaching deregulation that threatens to destabilize an increasingly fragile financial sector, with enormous risks for the public and few benefits”, denounced Fran Boait, director of the NGO Positive Money in a statement sent to AFP.
These announcements complement a bill currently before Parliament, which notably assigns a secondary objective to regulators: that of promoting the growth and competitiveness of the sector.
The measure is also denounced by opponents of the reform, who fear that it will divert regulators from their main mission: to protect financial stability and consumers. Another reason for criticism is London’s intention to remove a limit on bankers’ bonuses inherited from the EU.
“Brexit Opportunities”
The executive also launched a few months ago a reform of insurance companies, hitherto governed by the European directive Solvency II.
London plans in particular to relax capital requirements for companies in the sector, hoping to unlock tens of billions of pounds for “green” and infrastructure investments.
However, the government has recently given up introducing a power of direct intervention in the regulation of financial services, as it had once envisaged.
For the Treasury, “the Edinburgh reforms will give unparalleled vigor to British financial services, taking advantage of the opportunities offered by Britain’s exit from the EU”.
However, since Brexit, London has seen Paris and Amsterdam nibbling away at its position as Europe’s leading financial center.
The Conservative government is “trying to find a justification for Brexit,” Steve Schifferes, professor of political economy at City University in London, told AFP.
But according to him, these reforms will not generate a “big bang” such as the sector across the Channel experienced following the deregulation of the 1980s.
The numerous “statements of intent” announced on Friday will still need to be clarified, he adds, especially since certain measures “may not come into force if Labor is elected” during the next general elections, scheduled for 2024.
The professionals of the sector, them, applaud.
It is “a comprehensive set of reforms which, if implemented effectively (…) should help to strengthen the attractiveness of the United Kingdom” for companies, estimates Miles Celic, director of TheCityUK, one of the main London financial lobbies.
The financial sector generates 216 billion pounds (250 billion euros) a year and 76 billion pounds (88.1 billion euros) in tax revenue for the State, while employing more than 2.3 million people according to the Treasury.
