British PM defends controversial financial reforms
Britain on Friday launched a post-Brexit plan to relax curbs on its powerhouse City sector introduced after the 2008 financial crisis, denying the reforms will bring about new instability. Prime Minister Rishi Sunak insisted the government was not being reckless in scrapping "ring-fencing" of assets held by the biggest banks, to separate their retail arms from riskier investment operations. "No, the UK has always had and always will have an incredibly respected and robust system of regulation for the financial services sector," Sunak told reporters. "But it's also important to make sure the industry is competitive -- there are a million people employed in financial services and they're not just in London, in the City." The ring-fencing policy was introduced after the 2008 global financial crisis, to help banks survive another meltdown. The so-called "Edinburgh reforms", announced in the Scottish capital by finance minister Jeremy Hunt, also eased capital requirements for smaller lenders. The government has already said it plans to lift a cap on bankers' bonuses, and to require UK regulators to prioritise growth and competitiveness, alongside market stability. It says the reforms have been enabled by Britain's exit from the European Union. Brexit is allowing the government to "reshape our regulatory regime and unleash the full potential" of the finance industry, said Hunt, who voted in 2016 to stay in the EU. He stressed that "we have learned the lessons of that (2008) crash, we put in place some very important guardrails, which will remain". "But the banks have become much healthier financially since 2008," the chancellor said, adding the reforms would help the City better compete with US and Asian markets. Since Brexit, the City has slipped behind Paris and Amsterdam by some measures. At Brussels' insistence, UK finance was not covered by Britain's EU trade treaty. And there is mounting concern about the everyday effects on people and businesses of increased costs and border delays. Brexit has not helped tame red-hot inflation or cut soaring food bills, according to recent research from the London School of Economics. "I think this whole idea that there is a massive dividend from Brexit (for finance) is flawed," economics professor Steve Schifferes at City, University of London, told AFP. The ring-fencing reform "is the most controversial bit (and) the most unwise" aspect of the proposals, he added. Fran Boait, executive director of the pro-consumer campaign group Positive Money, said the end to ring-fencing was "extremely concerning". "Behind the spin, today's announcements amount to wide-ranging deregulation that threatens to destabilise an increasingly fragile financial sector, with huge risks to the public and little benefit," she said. The opposition Labour party, which is tipped in opinion polls to form the next government, also expressed unease. But Miles Celic, chief executive of business lobby group TheCityUK, welcomed the "comprehensive" package. "Boosting the industry's competitiveness and securing the UK's position as a world-leading international financial centre is an investment in the nation's success and in communities across the country," he said. Under the reforms, the Treasury said it would axe "hundreds of pages of burdensome" EU-era rules that are deemed detrimental to economic growth and company investment. "This will establish a smarter regulatory framework for the UK that, is agile, less costly and more responsive to emerging trends," it said. However, the government's push to deregulate after Brexit has run into criticism that it intends a "race to the bottom", depriving Britons of important protections enacted by the EU. (AFP)