Government announced major overhaul of financial regulation
Today, the UK government have announced new banking rules to help the current economic crisis – it’s caused the biggest shake up in 30 years.
Presented as 30 new reforms, UK authorities have said the new rules will ‘turbocharge’ economic growth.
Rules that have been previously instated to legally separate retail banking from risker investment operations, which were applied after the financial crash in 2008 when some banks faced collapse, will be reviewed.
Separating investment and retail banking aims to protect the utility aspect of day-to-day banking from being endangered by losses sustained by higher-risk investment activities.
However, the government has now stated it will allow insurance companies to invest in long-term assets such as housing and windfarms to boost investment and help its Levelling Up agenda.
Chancellor Jeremy Hunt said the changes would secure ‘the UK’s status as one of the most open, dynamic and competitive financial service hubs in the world.’
Mr Hunt has also added the reforms ‘seize on our Brexit freedoms to deliver an agile and home-grown regulatory regime that works in the interest of British people and our businesses’.
As well as relaxing the rules on what investment companies can spend their money on, the government has also announced it will scrap a cap on bankers bonuses.
When delivering his Autumn Statement, Jeremy Hunt said he would remove the cap on bankers bonuses, but bosses in the City of London have complained about the bonus rules, arguing they lead to a higher base pay that pushes up banks’ fixed costs.
In addition to opposing removing the cap on bankers bonuses, critics also remain sceptical of the announcement to introduce new banking rules, claiming authorities have forgotten the repercussions that came with the financial crash 15 years ago.
Between 2007 and 2009 the labour government spent £137bn of public money to bail out banks and the plans have been described as another ‘Big Bang’, which is a reference to when Margaret Thatcher removed regulations from financial services in 1986.
Despite this, Jeremy Hunt is set to meet with the bosses of the UK’s largest financial services in Edinburgh on 16th December to discuss the plans.
Photo by Etienne Martin