Written by 3:00 pm EU Investment

Bank of England braced for fresh clash with Truss over EU banking rules

The European Union is set to ease its own Basel rulebook and diverge on certain key areas, meaning that British banks could be forced to implement more stringent standards than rivals on the Continent.

UK Finance, the main banking lobby group, has expressed concerns about the design of the latest Basel package.

The looming clash comes as Ms Truss and Mr Kwarteng attempt to unleash a “Big Bang 2” in the City of London in a bid to make the UK’s financial services industry more internationally competitive.

This week, in one of his first acts as Chancellor, Mr Kwarteng told City bosses he will pursue sweeping financial reforms to unleash growth, in a direct echo of Margaret Thatcher’s deregulation of the Square Mile in the mid-1980s.

Executives are already lobbying for changes they would like to see. Ms Truss has come under pressure to force regulators to make boosting competitiveness their primary goal.

At a meeting with City bosses last month, industry chiefs urged Ms Truss to make promoting global competitiveness a “primary objective” of the FCA and PRA, according to sources, amid fears London is falling behind rival centres.

Such a move would go further than the Financial Services and Markets Bill currently going through Parliament, which proposes making promoting competitiveness a secondary objective of regulators.

At present, the main remit of City regulators is to ensure markets and financial systems are “sound, stable and resilient”.

During the Conservative leadership election, Ms Truss was understood to be weighing a potential merger of the PRA and the Financial Conduct Authority (FCA) in a bid to put growth and competitiveness at the heart of post-Brexit regulation.

The increased focus on axing red tape and boosting competitiveness is likely to further increase tensions between the Government and City regulators.

Ministers and Andrew Bailey, the Bank of England Governor, have clashed over who is to blame for the cost-of-living crisis as inflation spirals out of control.

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