To maintain the City of London’s position as a preeminent global financial centre, Britain will reform its banking regulations to permit banks to take more risks, a government official said on Tuesday.
The City of London is now more competitive due to centres like Paris and Frankfurt as well as long-time rivals like New York but also Singapore. The City of London was effectively cut away from the European Union by Brexit.
The EU will introduce a new regulation the following week that will require banks operating within the EU to move some of their clearing of euro derivatives from London to Frankfurt.
A fresh financial services bill that is currently being adopted in parliament, according to city minister Andrew Griffith, will update financial rule books, make regulators more responsive, and reduce insurance capital buffers while maintaining high standards.
The general trend is to accept more risk. People should not risk-off because they can benefit from taking chances; rather, they should manage those risks in a responsible manner, Griffith said at a Financial Times event.
He continued that it is conceivable to improve the UK as a location for banks by gradually releasing some of the capital that has been trapped inside the ring-fence.
The Bank of England has strongly supported a series of regulations that require banks to ring-fence or shield their retail businesses with a customised cushion of capital. Banks have campaigned to relax these regulations.
The finance ministry has pledged to overhaul financial regulations in a “Big Bang 2.0” move to increase the City’s competitiveness on the global stage, but Griffith has stated he will be cautious and judicious when it comes to removing any EU-originating regulations.
According to Griffith, the emphasis would be on maintaining Britain’s open financial market, which permits skilled labour to enter and exit, decreasing “friction” through appropriate standards, and, whenever possible, “aligning” with other regulatory regimes.
Griffith reaffirmed government goals to develop the UK from its current position as a global fintech powerhouse into a centre for crypto-assets as well as the blockchain technology that underpins them.
The market for fiat-backed stable coins is ripe with opportunities. According to Griffith, that might be a crucial mechanism for payments in the future.
Following the failure of the FTX cryptocurrency exchange, which also affected other crypto firms, the cryptocurrency sector has seen a volatile few weeks.
When a “mini-budget” caused turbulence in the bond markets in September, requiring the Bank of England to step in, Britain’s reputation as a secure destination for financial services took a serious hit.
While the markets have stabilised under the leadership of Rishi Sunak, chief executive of Britain’s largest domestic bank Lloyds (LLOY.L), Charlie Nunn, said the time of political unrest has a long-lasting impact on investor interest.
Nunn noted the general unease about the UK, citing the current state of political unrest and worries about the country’s finances. He said that the UK still enjoys the discount.
Nunn stated that he appreciated the City’s competitiveness being given more attention, as it had not been in the previous ten years.
Nunn claimed that three to four months ago, Lloyds started providing struggling mortgage borrowers with interest-only or lower-cost options to help them cope with Britain’s rising cost of living crisis.
British businesswoman and Citi’s head of EMEA M&A Alison Harding-Jones said during the event that the country was still strong and welcoming to foreign investment.
Although there is a strong belief that the wobble that has been observed over the previous few months is merely a temporary blip, she added that this is still only an assumption.