BoE governor warns Reeves over weakening banking rules too much

The Guardian

22-07-2025

The governor of the Bank of England has warned the chancellor, Rachel Reeves, against a radical watering-down of City banking rules because it would risk repeating the mistakes that led to the 2008 financial crisis.
Andrew Bailey said that while some changes to the rules could be helpful, wholesale changes to unleash risk-taking in the City of London in the name of economic growth would be counterproductive.
'There isn't a trade-off between financial stability and growth. We've had that experience,' he told MPs on the Treasury select committee.
Reeves last week used her annual Mansion House dinner to announce sweeping changes to banking industry rules, telling City bosses she believed that in too many cases regulation was a 'boot on the neck' of business.
Bailey refused to back the chancellor's analogy when pressed by the Treasury committee chair, Meg Hillier, saying: 'I do not use those terms, let me say that … It is not a term I use.'
The governor said veterans of the 2008 financial crisis recognised there were clear dangers linked to slashing City red tape.
'Sadly I can understand when I hear people say the financial crisis is now way in the past, we've got past that, that's all solved, that's out of the way, move on … Yes of course the world moves on,' Bailey said. 'But that was the experience of losing financial stability and we had a very serious recession in this country after that.'
However, he said regulations should not be set in stone, highlighting how the government could tweak City rules after Brexit to make Britain's banking industry regulations more reflective of the UK than the EU.
'There are areas where we should clearly look at it. And we'll look at it, we're very open to that. We've announced a whole range of things we're doing. That's a good thing. But we can't compromise on basic financial stability, that would be my overall message.'
Bailey's comments come after several leading figures involved in Britain's post-2008 drive to prevent a repeat of the financial crisis warned Labour against unpicking bank ringfencing – a key measure to separate high street banking from riskier investment banking that was introduced after the collapse.
Sir John Vickers, the architect of the UK's ringfencing rules, told the Guardian a wholesale retreat would be a 'very bad idea'.
Sign up to Business Today
Get set for the working day – we'll point you to all the business news and analysis you need every morning
after newsletter promotion
Against a backdrop of intensive lobbying from leading banks to water down the regulation, Bailey said such a change would have little benefit for lenders and put UK households at heightened risk.
'It [ringfencing] has benefits in terms of UK customers and UK consumers; businesses and households. I think that is a helpful feature of it. I don't think it hinders banks fundamentally in terms of their business models,' Bailey added.
'Again, at the margins, I am sure there are things that can be improved and we will work constructively to go through that process. It has established itself as part of the system and to me it would not be sensible to take it away at this point.'