The UK’s strongest monetary regulators have warned Rishi Sunak’s fledgling authorities towards introducing a political veto that will jeopardise their independence or some other legislative adjustments that will undermine regulatory requirements post-Brexit.
Sam Woods, chief govt of the Prudential Regulation Authority and Nikhil Rathi, head of the Financial Conduct Authority, delivered the warnings on the annual Mansion House gathering of City leaders on Thursday.
Overhauling monetary regulation has been a key precedence of ministers after Brexit, most controversially via provisions to introduce a ‘call in’ energy that will permit politicians to over-rule regulator’s choices, in restricted circumstances.
The Financial Services & Markets Bill, which had its second studying on September 7, additionally creates a brand new secondary mandate requiring regulators to “advance the international competitiveness and medium to long-term growth of the UK economy.”
Woods informed the viewers: “A power which allowed ministers to override regulatory decisions just because they took a different view of the issues involved would represent a significant shift away from a model of independent regulation,” including that he can be “very cautious” of any such measure.
“Some might think that such a power would boost competitiveness. My view is that through time it would do precisely the opposite, by undermining our international credibility and creating a system in which financial regulation blew much more with the political wind — weaker regulation under some governments, harsher regulation under others,” Woods mentioned.
His sentiments had been echoed by Rathi, who mentioned it was “vital” that the FCA’s “independence and agility at speed [was] not undermined by any proposed call-in power”.
Woods additionally sounded a notice of warning in regards to the prospect of a free-for-all on banker pay after the UK abandons EU guidelines that cap banker bonuses at twice wage. The PRA has been charged with working a session on banker remuneration guidelines to switch the cap.
“My own view, based on personal experience as a Treasury official through the global financial crisis, is that the 100 per cent cash-out at year-end approach to bonuses which was common in banking up until 2008 was an important part of what drove the financial system over the cliff, and we should have no appetite to return to that heads-I-win tails-you-lose approach,” he mentioned.
On the secondary mandate round competitiveness, Rathi mentioned that it was “vital that we do not compromise on consumer protection, market integrity and competition”.
Woods mentioned that whereas there might be some smart reform of regulation after Brexit, such because the overhaul of insurance coverage solvency guidelines, “any attempt to become a global financial centre by competitively deregulating would be self-defeating by its nature: major international financial institutions want a safe harbour, not a wild west.”
Source: www.ft.com