UK says will allow banks to take more risk to stay competitive
By Huw Jones, Iain Withers and Lawrence White
LONDON, Nov 29 (Reuters) - Britain will change its rulebook to allow banks to take more risks in order to keep the City of London a leading global financial centre, a government minister said on Tuesday.
The City was largely cut off from the European Union by Brexit and faces greater competition from centres like Paris and Frankfurt, as well as longstanding rivals like New York and Singapore.
Next week the EU will set out a new law to force banks in the bloc to shift some of their euro derivatives clearing from London to Frankfurt.
City minister Andrew Griffith said a new financial services bill now being approved in parliament will bring financial rule books up to date, make regulators nimbler, cut insurance capital buffers, though maintain high standards.
"The overall thrust of things is to allow more risk... You get reward from taking risks, you shouldn't be risk off, we just need to manage that in an appropriate way," Griffith told a Financial Times event.
"We can make the UK a better place to be a bank, to release some of that trapped capital over time around the ring fence," he added.
Banks have lobbied to ease rules that force them to ring fence or insulate their retail arms with a bespoke cushion of capital, a set of rules the Bank of England has vigorously defended.
The finance ministry has promised a "Big Bang 2.0" shake up of financial rules to boost the City's global competitiveness, though Griffith said he would be "pragmatic" and "selective" when it comes to scrapping any EU-originated rules.
The focus will be on keeping Britain an open financial market which allows skilled labour to move in and out, reducing "friction" through proportionate rules, and "alignment" with regulation elsewhere, wherever possible, Griffith said.
Britain's reputation as a stable location for financial services took a severe knock in September when a 'mini-budget' led to turmoil in bond markets, forcing the Bank of England to intervene.
Charlie Nunn, chief executive of Britain's biggest domestic bank Lloyds LLOY.L , told the event that while new prime minister Rishi Sunak had calmed markets, the period of political chaos had had a lasting effect on investor appetite.
"There is nervousness about the UK overall," Nunn said, referring to the period of political instability and concern over the nation's finances. "The UK still has that discount."
Nunn said he welcomed increased emphasis on the City's competitiveness, adding that it had not been a focus over the last decade.
Nunn said that in response to Britain's growing cost of living crisis the lender had begun offering struggling mortgage borrowers interest-only or lower cost products to help them cope, starting three to four months ago.
Alison Harding-Jones, head of EMEA M&A at US bank Citi, told the event that Britain remained a strong place and open for business.
"I hope what we've seen over the course of the past few months is a wobble that doesn't make a difference in the strength of the UK, but we will have to see," she said.
Reporting by Huw Jones and Iain Withers, Editing by Ed Osmond
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.