UK says it will allow banks to take more risk to stay competitive

The city has been largely cut off from the EU by Brexit and faces increased competition from centers such as Paris and Frankfurt, as well as longtime rivals such as New York and Singapore.

Next week, the EU will introduce new legislation requiring banks in the Union to transfer part of their euro derivatives clearing from London to Frankfurt.

City Secretary Andrew Griffith says a new Financial Services Bill now rushing through Parliament will update financial regulations, make regulators more nimble, reduce insurance capital reserves while maintaining high standards.

“The general direction is to allow more risk… Risk-taking is rewarded, you don’t need to be risk-averse, we just need to manage it properly,” Mr Griffith told the conference. An event organized by the Financial Times.

“We can make the UK a better place to bank by releasing some of the capital that has been trapped over time around the safety fence,” he added.

Banks have lobbied to relax rules that require them to insulate their retail branches with a tailored capital cushion, a set of rules that the Bank of England has staunchly defended.

The Chancellor of the Exchequer has promised a ‘Big Bang 2.0’ overhaul of financial rules to boost the City’s global competitiveness, although Mr Griffith said he would be ‘pragmatic’ and ‘selective’ when it comes to removing any rules that come from the EU.

Emphasis will be placed on maintaining an open financial market in the UK that allows skilled labor to enter and leave, on reducing “friction” through proportional rules and on “alignment” with existing rules elsewhere, as far as possible, said Mr. Griffith.

UK DISCOUNT

Britain’s reputation as a stable place for financial services took a serious hit in September when a “mini-budget” caused turmoil in bond markets, forcing the Bank of England to intervene.

Charlie Nunn, chief executive of Britain’s largest national bank Lloyds, told the event that while new prime minister Rishi Sunak had calmed markets, the period of political turmoil had had a lasting effect on investor appetite.

“There is some nervousness around the UK as a whole,” Mr Nunn said, referring to the period of political instability and worries about the country’s finances. “The UK still has this discount”.

Sir. Nunn said he welcomed the increased emphasis on the city’s competitiveness, adding that it had not been a focus of concern for the past decade.

Sir. Nunn said that in response to the growing cost of living crisis in Britain, the lender had started offering distressed mortgage borrowers fixed-rate or reduced-cost products to help them cope, and had been doing so for three or four months.

Alison Harding-Jones, head of EMEA mergers and acquisitions at US bank Citi, said at the event that the UK remained strong and open for business.

“Hopefully what we’ve seen over the last few months is just a fluctuation that won’t affect the strength of the UK, but we’ll have to see,” she said.

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