London plans “liberation strike” from old EU rules

The British Treasury Secretary in front of his Downing Street office.

According to Jeremy Hunt, he wants to free banks and insurance companies from their EU shackles.

(Photo: AP)

London The British government wants to relax numerous regulations for banks and insurance companies from the days of EU membership. Treasury Secretary Jeremy Hunt announced on Friday morning a 30-point plan called the “Edinburgh Reforms” designed to ensure more growth and the leading position of the financial center London.

Among other things, the government is planning to relax the capital requirements for insurance companies and to soften the strict separation between investment and retail banking (private customer business). The personal and financial liability of financial managers for misdemeanors and errors in their areas of responsibility, which increased after the 2008 financial crisis, is also to be reviewed. The government had already lifted the bonus cap for bankers.

“The Edinburgh reforms use our Brexit freedoms to create a flexible and domestic regulatory regime that works in the interests of the British people and our businesses,” Hunt said, according to the pre-release speech in Edinburgh.

The reform package is also referred to in London as “Big Bang 2.0” – an allusion to the deregulations for the City of London initiated by former Prime Minister Margaret Thatcher in 1986.

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Hunt is now hoping for a similar liberation from the dismantling of the old EU rule. “Leaving the EU offers us a unique opportunity to redesign our regulatory system and unleash the full potential of our impressive financial services sector,” said the finance minister, announcing that other sectors would also be “exempted” from EU rules: “We will.” Reforming EU laws that weigh on our economy and stifle growth in other industries like digital and life sciences.”

>> Also read: Clearing, IPOs, bankruptcy law. The EU wants to strengthen the capital markets with three reforms

Critics fear that the British deregulation offensive could trigger a “race to the bottom”. The EU Commission recently announced that it would relax the requirements for clearing houses in order to attract business from London to the continent.

London financial district skyline

The British City Minister Andrew Griffith contradicted the fears in an interview with the “Financial Times”: There will be no deregulation race. However, the time has come to review the tightened rules that followed the 2008 financial crisis, as the banking sector is now in far better shape.

Particularly controversial is Hunt’s plan to commit the supervisory authorities in the city to a competition and growth goal in addition to financial stability and consumer protection. Both John Vickers, who headed a commission on banking reform after the financial crisis, and former Financial Service Authority (FSA) chief Adair Turner criticized the idea. “It’s a mistake to give financial sector regulators a competitive target,” Turner said.

More freedom for short seller and new rules for cryptocurrencies

There is also resistance from the Bank of England (BoE). The British central bank has just come out in favor of the UK, like the EU, following the strict international financial rules for banks.

“Aligning with strict international banking standards will support economic growth by underpinning the competitiveness of the UK financial centre, boosting investor confidence in the UK banking system and ensuring banks can fund the economy during downturns,” he said BoE-Financial supervisor Sam Woods the strict stance of the monetary authorities.

London also wants to review the existing rules for “short selling”, in which investors speculate on the fall in the price of securities. Hunt also announced that he would create “a safe regulatory environment for (digital) stablecoins” and ensure “that the government has the necessary powers to bring a wider range of investment-related cryptoasset activities under UK regulation.”

More: British government promises “big bang” when dismantling EU rules – economy is appalled

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