The UK government has announced sweeping reforms to the regulation of the financial services industry, which it hopes will open up future growth prospects.
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LONDON – Deepening reforms to the UK financial services sector Finance Secretary Jeremy Hunt said it would mark the first phase of a 20-year plan to make Britain the next Silicon Valley.
Speaking shortly after the regulatory overhaul was announced, Hunt said the plans would improve the country’s global competitiveness, attract investment and strengthen the government’s vision for Britain as a innovation center.
“We should have a 20-year plan to become the world’s next Silicon Valley,” Hunt said via video call during a conference hosted by the Financial Times.
Strengthening Britain’s financial services sector – as well as strengthening world-class universities and the technology and life sciences industries – is one of the three pillars cited by Hunt to drive that goal.
“The main aim of this is to make the UK the most competitive place in Europe, one of the most competitive in the whole world,” he added.
The finance minister was speaking from Edinburgh, Scotland, where earlier on Friday he announced a comprehensive overhaul of the UK’s financial regulation system.
Dubbed the Edinburgh Reform, pack of 30 measures including a relaxation of the rule that requires banks to separate their retail operations from their investment arm. This measure — first introduced after the 2008 Financial Crisis — will not apply to retail-focused banks.
The government also confirmed it will review rules around the accountability of top financial executives – another regulation after 2008. The senior management regime, introduced in 2016, This means that individuals at regulated companies may face penalties for poor behavior, workplace culture or decision making.
Hunt said it was important not to “forget the lessons of 2008”, but acknowledged that banks are in a “much stronger” position today.
Critics of the reform have expressed deep concern.
Fran Boait, executive director of campaign group Positive Money, said: “Behind the wheel, today’s announcements leading to widespread deregulation threaten to destabilize the financial sector today. more fragile, with great risk to the public and little benefit.”
“With new targets for regulators to promote ‘international competitiveness’ and the growth of the financial services sector, we may just see the beginnings of this,” Boait said. race to the bottom in terms of standards”.
The reforms have been billed by the government as an overhaul of post-Brexit EU legislation that “slows growth”.
However, Hunt admitted to the FT’s political editor, George Parker, that some reform could be achieved within the union.
They come when the UK is no match for its EU neighbors and OECD countries more broadly, in returning to pre-pandemic growth rates.
“There were a lot of these reforms that we could have done,” says Hunt. “But, of course, the freedoms of Brexit mean we have more powers.”
Hunt said there are parts of the EU regulation that the UK will likely keep, while others will be phased out entirely to allow Britain to support its “growth industries”.
UK Finance Secretary Jeremy Hunt has said Britain should have a “20-year plan” to become the world’s next Silicon Valley.
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In a nod to the Bank of England – yes quick intervention helped boost the economy after the rise of his predecessor Kwasi Kwarteng disastrous small budget — Hunt also praised UK regulators and their independence.
“I am a big fan of our regulatory structures,” says Hunt. “The independence of the Bank of England and other regulators… has given us a huge advantage.”
He added that independence helps strengthen the UK’s position as an investment hub.
He said: “It makes people believe that the UK is a safe place to invest. “And stability was – and still is – the most important thing.”
— CNBC’s Jenni Reid contributed to this report.