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Britain has eased banking regulations since the 2008 global financial crisis in a bid to attract investment and secure London’s status as Europe’s leading financial centre.
Chancellor of the Exchequer Jeremy Hunt said on Friday that changes following Britain’s departure from the European Union in 2020 would make the UK “one of the most open, dynamic and competitive financial services centers in the world”.
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The package of more than 30 changes includes removing the cap on bankers’ bonuses and easing capital requirements for smaller lenders. The government also said it would overhaul rules that hold bankers accountable for their decisions and loosen “ringfencing” rules aimed at separating risky investment banking from retail operations.
Outside the Bank of England in the financial district in the City of London on Monday 17 October 2022. (AP Photo/Alberto Pezzali/AP Pictures)
Hunt said the government was using “Brexit freedoms” to make Britain more competitive. But many economists say Britain’s exit from the European Union has put up barriers to trade and led some firms to move offices and jobs to other European cities.
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Last year, Amsterdam overtook London as Europe’s largest share trading centre, but London remains the largest financial services center overall.
Chemical tanker barges are seen near silos and treatment towers at Royal Dutch Shell Plc’s Pernis refinery in Rotterdam, the Netherlands, Tuesday, April 27, 2021. (Peter Burr/Bloomberg via Getty Images/Getty Images)
The Conservative government said the changes to the rule would create a “smarter regulatory framework”. But critics say they could rekindle the risks that led to the 2008 crisis. At that time, the British government had to spend billions of taxpayers’ money to save some banks from the crisis.
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Sarah Olney, the opposition Liberal Democrat Treasury spokeswoman, said it was “absolutely tone deaf that the government is raising taxes for working families, cutting taxes and increasing bonuses for the banks”.
A man walks along the South Bank, with the Houses of Parliament in the background, in London on August 3, 2022. (REUTERS/Henry Nicholls/Reuters)
“Our financial services need good and sensible regulation, not promises to cut red tape or a race to the bottom,” he said.