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LONDON, Nov 29 (Reuters) – Britain will change its rulebook to allow banks to take more risk to keep the city of London a leading global financial center, a government minister said on Tuesday.
The city was largely isolated from the European Union by Brexit and faces more competition from centers such as Paris and Frankfurt, as well as long-standing rivals such as New York and Singapore.
Next week the European Union will introduce new legislation to force the bloc’s banks to shift some of their euro derivatives clearing from London to Frankfurt.
City Minister Andrew Griffith said the new Financial Services Bill, now approved in Parliament, would bring financial rule books up to date, make regulators smarter, reduce insurance capital buffers, yet maintain high standards.
“The overall thrust of things is to take more risk… risk-taking rewards you, you shouldn’t avoid risk-taking, we need to manage it properly,” Griffith said at a Financial Times event. .
“We can make the UK a better place to be a bank, to release some of that trapped capital around the ring fence from time to time,” he added.
Banks have lobbied to relax rules that force them to hedge or insulate their retail arms with bespoke cushions of capital, rules that the Bank of England has vigorously defended.
The Finance Ministry has promised a “big bang 2.0” shake-up of financial regulations to boost the City’s global competitiveness, although Griffith said it would be “pragmatic” and “selective” when it comes to scrapping any EU-originated rules.
Britain will be focused on keeping an open financial market that allows skilled labor to move in and out, reducing “friction” through proportionate rules and “aligning” regulation wherever possible, Griffiths said.
UK discount
Britain’s reputation as a stable location for financial services took a hit in September when the ‘mini-budget’ sent bond markets into turmoil, forcing the Bank of England to intervene.
Charlie Nunn, chief executive of Britain’s largest domestic bank Lloyds ( LLOY.L ), said at the event that while new prime minister Rishi Sunak had calmed markets, the period of political chaos had a lasting impact on investor appetite.
“There is overall panic in the UK,” Nunn said, referring to a period of political instability and concern about the nation’s finances. “The UK still has that discount.”
Nunn said he welcomed the city’s increased emphasis on competitiveness, adding that it had not received attention in the past decade.
Nunn said the lender began helping struggling mortgage borrowers cope with interest-only or low-cost products three to four months ago in response to Britain’s rising cost of living crisis.
Alison Harding-Jones, head of EMEA M&A at US Bank City, said at the event that Britain was a strong place and open for business.
“I hope that what we’ve seen in the last few months is a shake-up that doesn’t make any difference to the strength of the UK, but we’ll have to see,” she said.
Reporting by Hugh Jones and Ian Withers, editing by Ed Osmond
Our Standards: The Thomson Reuters Trust Principles.
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