Market: London will allow banks to take more risks

by Huw Jones, Iain Withers and Lawrence White

LONDON (Reuters) – The British government will change its rules to allow banks to take on more risk, so the City remains one of the world’s premier financial centres, a minister in Rishi Sunak’s government said on Tuesday.

The City of London has been largely isolated from the European Union by Brexit and faces increased competition from financial centers like Paris or Frankfurt, as well as from long-standing rivals like New York or Singapore.

The European Union is due to adopt a new law next week that will force banks in the European bloc to transfer part of their derivatives clearing activities from London to Frankfurt.

Currently in the process of being approved by Parliament, a new law on financial services will update regulations, facilitate the work of the regulator, reduce the countercyclical capital buffer while maintaining demanding standards, said the economic secretary of the Treasury Andrew Griffith, also City Minister.

“The general idea is to allow more risk (…). We are rewarded when we take risks, we should not be deterred from taking them, we just have to manage it in an adequate way”, a- he said at an event hosted by the Financial Times.

Britain’s Treasury has promised a sweeping ‘big bang 2.0’ change to financial rules to boost the City’s global competitiveness, though Andrew Griffith said he would be ‘pragmatic’ and ‘selective’ when it comes to abolishing rules established by the European Union.

Financial institutions are pushing to relax the rules, ardently defended by the Bank of England, which oblige them to protect their retail banking activities with an appropriate “cushion” of capital.

Andrew Griffith also reaffirmed the UK government’s ambition to make the UK a global hub for cryptocurrencies and blockchain technology.

“We see big opportunities in fiat-secured stablecoins (a form of stablecoin, editor’s note). This can become a really important payment mechanism in the future,” he said, as the market cryptocurrencies has entered a turbulent zone since the bankruptcy of the FTX trading platform.

(French version Jean-Stéphane Brosse, edited by Sophie Louet)

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