Bank of England's Bailey defends bank rules after Reeves attack

Reuters

a day ago

LONDON, July 22 (Reuters) - Bank of England Governor Andrew Bailey said on Tuesday he did not agree with finance minister Rachel Reeves' description of regulation as a "boot on the neck of businesses" and he defended rules for the banking sector which are overseen by the BoE.
Bailey told lawmakers that the central bank was open to making changes to the detail of post-financial crisis financial regulation to help the government's economic growth push.
But he favoured keeping rules on banks in areas such as ring-fencing - which separates consumer lending operations from more volatile investment banking - and said Britain was not imposing tougher regulation than elsewhere.
"I do think that the ring-fencing regime is an important part of the structure of the banking system," he said, noting the rules made it easier to deal with troubled banks.
Reeves last week promised "meaningful reform" of the ring-fencing rules, something sought by the leaders of several major lenders in Britain.
Asked by a lawmaker about Reeves' describing regulation as a "boot on the neck" of businesses, Bailey said: "I don't use those terms. Let me say that ... it's not a term I use" before adding: "We can't compromise on basic financial stability. That would be my overall message."
Bailey was speaking to the House of Commons' Treasury Committee alongside two other members of the BoE's Financial Policy Committee, Randall Kroszner and Carolyn Wilkins.
Kroszner, a former U.S. Federal Reserve official, said he saw no specific clash at this stage between financial stability and the relaxation of regulations planned by Reeves.
"But always the devil is in the detail," Kroszner said.
Bailey also told the committee that a rise in British government borrowing costs - especially for long-dated bonds - was not out of line with increases in other countries.
"We have seen steepening of yield curves going on now," Bailey told the Treasury Committee.
"I think the important thing to say is that is a global phenomenon. It's not in any sense unique to this country. In fact, the pattern in this country is not in any sense out of line with what we've seen in other markets, and we've seen steeper increases in some other markets."
Rising borrowing costs were being driven by concerns about the impact on global trade from tariff policy decisions and uncertainty about the scale of future public borrowing, he said.
U.S. President Donald Trump has imposed tariffs on imports of many goods and has also won approval in Congress for tax cuts that are forecast to push up U.S. public debt.