Stifling red tape threatens to turn City of London into 'graveyard'
Excessive regulatory burdens on banks and insurers could stifle the City of London, turning it into a financial "graveyard", a senior Bank of England official has said
PA
Excessive regulatory burdens on banks and insurers could stifle the City of London, turning it into a financial "graveyard", a senior Bank of England official has said.
Sam Woods, the CEO of the Bank of England's Prudential Regulation Authority, said the UK’s effort to increase financial stability through added rules might dampen the essential risk-taking needed for economic vitality.
In his speech at the City banquet, Woods emphasised that risk-taking drives growth and innovation in a capitalist economy.
He stressed that the aim should be managing risks, not eliminating them, ensuring that failures don’t jeopardise the entire system.
Excessive regulatory burdens on banks and insurers could stifle the City of London, turning it into a financial "graveyard", a senior Bank of England official has saidPAHe said: “Risk is the lifeblood of a thriving capitalist economy, fuelling growth and innovation.
"The whole point of having a strong financial system is to enable society to take risks: by providing capital to promising but uncertain opportunities, and allowing business and households to pool their risks via insurance and hedging products.
"Our role as regulators is not to eliminate risk, but to ensure risks are properly managed, so that individual failures will not bring down the whole system."
City regulators, including the PRA, have faced increasing criticism in recent years for imposing excessive regulatory requirements on companies, with many arguing that this stifles economic growth.
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Similarly, the Financial Conduct Authority (FCA) has been under scrutiny for its extensive rule-making.
In February, the FCA was notably criticised for its proposal to publicly identify companies under investigation, and it also encountered backlash for mandating firms to report on their diversity and inclusion policies.
Last year, former Chancellor Jeremy Hunt introduced a new secondary mandate for regulators, including the PRA and FCA, requiring them to prioritise economic growth alongside their other responsibilities.
This move was widely interpreted as implicit criticism that the City's regulators had become an obstacle to economic progress.
Last year, former Chancellor Jeremy Hunt introduced a new secondary mandate for regulators, including the PRA and FCA, requiring them to prioritise economic growth alongside their other responsibilities
PASince taking office, Sir Keir Starmer has mostly adhered to the previous Government's approach, continuing to push regulators to consider the impact of their decisions on growth.
On Monday, addressing international financiers at the International Investment Summit, the Prime Minister said that the government would ensure economic regulators "treat growth as seriously as this room does."
Woods - whose PRA regulates 1,500 banks, building societies and insurers - said getting the right balance was difficult but added it was “implausible” that good businesses could “ thrive in an environment of ever-expanding regulation”.