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The Bank of England’s top financial regulator has announced plans to reduce the burden of rules on banks and insurers, saying changes can be made without causing a “race to the bottom” of financial regulation.
Sam Woods, chief executive of the BoE’s Prudential Regulation Authority, on Wednesday outlined new moves to meet the government’s demands to support economic growth and build financial resilience and support in a House of Lords committee. Economic competitiveness is “inextricably linked,” he said.
He said the PRA would allow retrospective authorization so that insurers do not need prior approval for investments. Woods added that reporting requirements for insurance companies have already been cut by a third, and that regulators will also outline plans to lower reporting requirements for banks this year.
Mr Woods told the House of Lords Financial Services Regulation Committee that the Matched Investment Facilitation would accelerate investment by insurers, which is sometimes delayed while awaiting regulatory approval.
He said reforms to insurer solvency rules had already reduced the insurance industry’s reporting requirements by a third. Mr Woods doubted whether the PRA would be able to achieve similar cuts for banks, but said: “I think there are some things that could be done there” and that a proposal would be submitted later this year.
US President-elect Donald Trump has pledged to take a more liberal approach to financial regulation, rolling out many of the safeguards that other countries have agreed to over the past decade to avoid a repeat of the 2008 financial crisis. There are growing concerns that the new system will be watered down.
British Prime Minister Keir Starmer has vowed to “dismantle” Britain’s bureaucracy and called on regulators to prioritize growth. Last month, he wrote to a number of watchdogs, including the PRA, asking them to respond by next week with proposals to boost economic growth.
Mr Woods said he was working on the PRA’s response. He called on the government to streamline the 25 areas in which regulators are asking for “attention”, which he said was making government policy-making “more bureaucratic”.
“I think we should avoid fighting for last place,” Woods said. “But I don’t think that’s what Congress is asking us to do.”
The previous Conservative government gave the PRA a new goal of supporting competitiveness and growth, but this was secondary to its main goal of promoting financial safety and soundness and protecting policyholders. It is something.
He said the new goals brought about “huge changes to our operations and organization.” This was “perfect timing” as the post-crisis reform phase was coming to an end and Brexit would give the People’s Liberation Army more powers to formulate policy independently of the EU.
“That puts us in the line of fire,” he said. “Where is the appropriate place to draw that line? We make those decisions all the time.”
“There’s a lot of pressure on the industry to ease things up, and I would say the political winds are very much in that direction at the moment,” he said.
Regulators need to “keep that in mind,” but Woods said he “doesn’t feel any major discomfort,” adding, “I don’t think it’s impossible, but it’s difficult.” That’s true,” he added. do. “
The PRA has already scrapped caps on banker bonuses inherited from the EU and diluted plans to increase capital requirements for UK banks as part of the so-called Basel Agreement between international regulators. In November, it also proposed rule changes that would make bankers’ bonuses payable more quickly and reduce the number of bonuses that are deferred for several years.
