The governor of the Bank of England, Andrew Bailey, has warned Chancellor Rachel Reeves against weakening banking regulations, arguing it could repeat the mistakes that led to the 2008 financial crisis. Speaking to the Treasury select committee, Bailey rejected Reeves' characterisation of regulation as a 'boot on the neck' of business, stating he does not use such terms.
Reeves announced sweeping changes to banking rules at the Mansion House dinner last week, part of the government's drive to boost economic growth. However, Bailey cautioned that wholesale reforms to encourage risk-taking would be counterproductive, noting that the 2008 crisis demonstrated there is no trade-off between financial stability and growth.
The governor acknowledged that some regulatory tweaks could be beneficial, particularly to make UK rules more reflective of the country after Brexit. However, he stressed that basic financial stability must not be compromised. His comments follow warnings from figures like Sir John Vickers, architect of ringfencing rules, against unpicking the separation of high street and investment banking.
Bailey also cast doubt on the introduction of a central bank digital currency, suggesting that if commercial banks succeed in adopting digital payment technologies, he would need 'a lot of convincing' to proceed with the Bank's own plan.
