Andrew Bailey yesterday put himself at odds with Rachel Reeves over the Chancellor’s outspoken attack on regulation. The Bank of England Governor made clear that he did not share Reeves’ recent claim that the enforcement of red tape acted as a ‘boot on the neck’ of business.
Andrew Bailey yesterday put himself at odds with Rachel Reeves over the Chancellor’s outspoken attack on regulation. The Bank of England Governor made clear that he did not share Reeves’ recent claim that the enforcement of red tape acted as a ‘boot on the neck’ of business.
Speaking to MPs on the Treasury select committee, he urged caution over a proposed shake-up of the ring-fencing system that separates traditional lending and deposit-taking from riskier investment banking. The comments appear to be a shot across the bows of the Chancellor as she seeks to unravel some of the reforms put in place during the financial crisis in a bid to boost growth.
They suggest she may face an unwanted battle with Threadneedle Street to add to friction with Labour backbenchers over spending cuts and the battle to balance the books, amid dismal economic growth and deteriorating public finances. Reeves took aim at regulators during her Mansion House speech to the City earlier this month.
But Bailey chose to dissociate himself from the ‘boot on the neck’ comments. He said: ‘It’s not a term I’d use. ‘I think there are areas that we clearly should look at it – we’ve announced a whole range of things we’re doing, and that’s a good thing. But we can’t compromise on basic financial stability and that would be my overall message.’
Reeves has also promised ‘meaningful reform’ of the ring-fencing regime – something being demanded by the bosses of a number of major banks who say they are a drag on business. But Bailey said he favoured keeping the rules. He told MPs: ‘I do think that the ring-fencing regime is an important part of the structure of the banking system.’
Bailey said the rules make it easier to deal with banks that get into trouble in a way that spares consumers, businesses and households. He added: ‘I’m sure there are things that can be improved and we will work constructively to get through that process.
‘I think it has established itself as part of the system and to me it would not be sensible to take it away at this point.’ Asked how he would respond if the Treasury seemed to be going ‘too far’ in stripping back regulation, Bailey said he and Bank officials would ‘start by making our views very clear’.