Britain’s regulators lack the mindset to boost growth and the financial sector’s global competitiveness, and need parliamentary backing to accept more risk when applying rules, the City of London said on Wednesday.
Chris Hayward, policy leader at the City, which administers the capital’s financial district, said that a new public-private body is needed to attract foreign investment.
The sector is worried about its competitiveness after being largely cut off from the European Union since Brexit, and as UK companies choose to list in New York.
In response to this, the Financial Conduct Authority (FCA) and the Bank of England’s Prudential Regulation Authority have been given a secondary objective of aiding growth and the financial sector’s international competitiveness when writing rules, but there is scepticism it will make a difference.
“I don’t think the FCA in particular, the regulators generally, culturally have found it within their psyche to really promote risk taking, taking opportunities to promote growth, being flexible,” Hayward told the House of Lord’s financial services regulation committee.
The new remit alone won’t boost inward investment and growth, and a new promotional body is needed for the UK to compete with Ireland and elsewhere, Hayward said.
“There seems to be some reticence about having a public private partnership,” Hayward said.
Parliament should also back regulators to accept more risk, given it implies “retribution” when things go wrong, as is inevitable at times, he added.
“It’s not fair to make regulators entirely the whipping boy,” Hayward said.
The FCA, which had no immediate comment, has faced a fierce backlash against its ‘naming and shaming’ plans to name companies it investigates early on, rather than after a probe has been concluded.
Britain’s finance minister Jeremy Hunt has said the plans appear to contradict the growth objective, and should be rethought.
Committee member Jonathan Hill suggested regulators need clarity between their statutory duties, and the “blue sky” and “social mission” discretion behind ‘naming and shaming‘ and other proposals that “reduce” growth and competitiveness.
The committee is scrutinising the new competitiveness objective ahead of the first annual report on it from regulators in coming weeks.