The Governor of the Bank of England is opposing plans drawn up by the Treasury to allow ministers to bypass financial watchdogs on key areas of City regulation.
Sky News has learned that Andrew Bailey has expressed his displeasure over the so-called ‘power to call’ to be included in the Financial Services and Markets Bill, which is expected to be introduced this year.
The clause, which is designed to be invoked only in cases where ministers believe it interferes in Britain’s national interest, has exposed tensions between the Treasury and the Bank, according to an executive. of the City, who have been informed of the matter.
Mr. Bailey is said to believe that the existence of call rights would undermine the Bank’s perception of independence, even though the bill would have little effect on autonomy in setting interest rates.
An ally of the governor said the matter could still be resolved amicably but Mr Bailey may need “further reassurance” about the circumstances under which the new mechanism would be triggered.
The new power to bypass the Prudential Regulatory Authority (PRA) will be kept at a reserve, similar to the Treasury Department’s ability to ‘electrify’ the ring fence that was introduced to protect depositors at major UK retail banks in 2019.
According to one source, it is rarely used, if at all.
If it is invoked, any attempt to bypass the decisions of the regulators would need congressional approval, they added.
One example of where the new power could be used would involve the Solvency-II insurance industry reforms being launched by the Treasury, but which is facing a degree of resistance from the PRA.
Ministers have pledged that the overhaul will free up tens of billions of pounds for insurers to invest in UK infrastructure projects.
However, at this week’s meeting, insurance executives told Rishi Sunak, prime minister, and John Glen, City minister, that they were concerned about the PRA’s attitude towards the reforms.
The Financial Times later reported that Boris Johnson expressed similar concerns.
Mr. Sunak is expected to detail the new bill during his annual speech at Mansion House later this month, as the Treasury Department seeks to accelerate changes to the City’s rule that could bring post-Brexit ‘dividend’.
Revealed in the Queen’s Speech in May, the most prominent components of the bill hailed by the Treasury Department related to its commitment to maintaining cash access; repeal the EU financial services law and replace it with a UK-centric approach; and update the goals of industry regulators, including the Financial Conduct Authority, including economic growth and international competitiveness.
The amendments to the watchdog’s target have drawn outcry from critics, who argue that the focus on competitive risk undermines the primary mission of promoting financial stability. .
The bill also includes reforms to UK capital markets regulation to promote investment, as well as new protections for consumers who fall victim to scams.
“We are reforming our financial services sector, now we have left the EU to make sure it works for the benefit of the community and its citizens, creating jobs, supporting it,” said Mr. businesses and drive growth across the UK”. in the May.
However, there are no immediate plans to scrap aspects of EU-wide legislation, such as bonus limits, with the cost of living crisis prompting the removal of restrictions on pay. of bankers is not politically good.
The Bank of England declined to comment on Saturday, while the Treasury said: “As announced in the Queen’s Speech, the upcoming Financial Services and Markets Bill will strengthen the us as a global leader in financial services, leveraging the benefits of Brexit by cutting the EU Red Ribbon and fostering a competitive market that drives investment to provide individuals and businesses.
“The bill will be introduced as congressional time permits.”
