Jeremy Hunt is due to unveil a 30-point package of City policy changes on Friday that will involve rowing back on regulations in order to boost competition and growth.
The chancellor’s announcement, referred to as the “Edinburgh reforms”, will outline how the government intends to “review, repeal and replace” a host of rules that were introduced to protect savers and the taxpayer after the 2008 financial crisis, but which ministers now believe risk hindering the success of London’s banks and insurers compared with their overseas peers.
The changes are Hunt’s attempt to rebrand what his predecessor Kwasi Kwarteng claimed would be a post-Brexit “Big Bang 2.0” for the City – a reference to the sweeping deregulations of the 1980s that were credited with elevating London as an international financial centre.
While the government has so far banged the drum for overhauling EU regulations that no longer apply to the UK, Hunt’s package is expected to target two key pieces of UK regulation.
They are the so-called senior managers’ regime, which holds bosses personally and financially responsible for problems that occur on their watch, and the ringfencing rules that are intended to protect everyday customers by separating their deposits from riskier investment banking operations.
The Treasury claims that the ringfencing rules in particular have been too burdensome on lenders, including those that do not have investment banking arms.
The department has also tried to quell concerns that repealing regulations could put the UK at risk of another financial crisis, saying City rules have “evolved” over the past decade and will continue to protect consumers and safeguard financial stability.
“This country’s financial services sector is the powerhouse of the British economy, driving innovation, growth and prosperity across the country,” the chancellor said in a statement. “Leaving the EU gives us a golden opportunity to reshape our regulatory regime and unleash the full potential of our formidable financial services sector.
“We are delivering an agile, proportionate and homegrown regulatory regime which will unlock investment across our economy to deliver jobs and opportunity for the British people.”
Hunt is expected to host a round table of banking and insurance bosses in Edinburgh on Friday after his announcement, which is also expected to involve issuing “new mandates” for the UK’s main financial regulators, the Financial Conduct Authority and the Prudential Regulation Authority, that will outline how the watchdogs are expected to “deliver growth and promote the international competitiveness of the UK”.
That mandate is understood to be in addition to a clause included in the wide-reaching financial services and markets bill, which will force regulators to consider how their rules help or hinder the competitiveness of City firms on the world stage. The proposal has been criticised by senior City figures, including the chairman of NatWest, Sir Howard Davies, as well as Sir Vince Cable, who warned that it could create the same conditions as those that led to the 2008 banking crash.
The Labour MP and shadow City minister Tulip Siddiq warned that Hunt’s package of changes risked triggering a regulatory “race to the bottom”. “We’ve been promised a Big Bang 2.0 on three occasions now, by three different Conservative chancellors. Instead, each time, it’s been more of a damp squib.
“The Conservatives have done untold damage to the UK’s global competitiveness and market confidence not just over the last 12 weeks, but also the last 12 years. The City doesn’t want more empty promises on deregulation or a race to the bottom.”
