UK Adds Focus on Growth in Considering Financial Regulation

The British finance ministry is moving forward with its plans to require regulators to consider the financial sector’s global competitiveness when writing rules, even after some in the country believe they make regulators look like “cheerleaders” for finance, according to a Reuters report Tuesday (Feb. 8).

Many in the country’s financial sector want the Bank of England’s Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) to help the City of London stay competitive around the world, which regulators in many other countries already do.

“The government therefore intends to provide for a greater focus on growth and international competitiveness through the introduction of secondary objectives for the PRA and FCA,” said Rohan Lee, deputy director for financial services strategy at the ministry, at a recent City & Financial conference.

“This will increase the regulators’ focus on supporting the U.K.’s financial services sector without jeopardizing the financial stability that underpins it,” he said.

Under the restructuring, ministry members can also require regulators to rethink existing rules and a new panel will require regulators to show the costs and benefits of proposed rules, Lee said, changes critics say could crimp the independence of regulators.

The ministry will likely change “significant amounts” of EU financial laws with rules from U.K. regulators when it proposes new legislation this year, the report says.

“It will take some years to bring this to fruition,” Lee said.

Related: Bank of England Takes the Slow Lane for CBDCs, and It is Not the Only One

Meanwhile, the Bank of England is still considering whether to issue a central bank digital currency (CBDC) and how the design should respect citizens’ privacy and guarantee financial stability.

The U.K. Parliament published a paper earlier this year assessing the benefits of having a CBDC against the risks that a retail CBDC would pose, especially on the issues mentioned above: privacy and financial stability, concluding that there wasn’t a convincing case for why the U.K. needs a CBDC.