Bank of England to relax rules for banks and insurers

Stay informed with free updates

Simply sign up UK financial regulation myFT Digest — delivered straight to your inbox.

The Bank of England’s top financial supervisor has announced plans to reduce the burden of its rules on banks and insurers, saying the changes can be made without “a race to the bottom” on financial regulation.

Sam Woods, chief executive of the BoE’s Prudential Regulation Authority, told a House of Lords committee on Wednesday that financial resilience and economic competition “go hand in hand” as he outlined new measures to meet government demand to support economic growth.

He said PRA Prior authorization will free insurers from the need for pre-approved approval of investments. Woods added that the regulator will outline plans to reduce bank reporting requirements this year, having already reduced them by a third for insurers.

Woods told the House of Lords Financial Services Regulation Committee that the “Matching Adjustment Investment Accelerator” would speed up investment by insurers, which is sometimes delayed while waiting for regulatory approval.

Reforms to solvency rules for insurers have already reduced reporting requirements for the sector by a third, he said. Although he doubted the PRA could make cuts of the same scale for banks, Woods said “we can do something there” and proposals will come later this year.

US President-elect Donald Trump has promised a more hands-off approach Financial controlOther countries fear that many of the safeguards agreed over the past decade will be washed away to avoid a repeat of the 2008 financial crisis.

UK Prime Minister Sir Keir Starmer did Vows to “tear apart” Britain’s bureaucracy and urged regulators to prioritize growth. He wrote to several watchdogs, including the PRA, last month asking them to respond within the next week with proposals to boost economic growth.

Woods said he is working on the PRA’s response. He called on the government to streamline 25 areas that require the regulator to “harmonise”, which he said made its policy-making “more bureaucratic”.

“I think we should avoid a race to the bottom,” Woods said. “But I don’t think that’s what Parliament asked us to do.”

The previous Conservative government gave the PRA a new purpose to support competitiveness and growth, secondary to its primary goals of promoting financial safety and soundness and protecting policyholders.

He said the new objective brought “a very significant change to what we’re doing and to the organisation”. It came at an “opportune time” as the post-crisis reform phase was winding down and Brexit gave the PRA more power to make policy independent of the EU.

“It put us in the firing line,” he said. “Where is the right place to draw that line? We are constantly judging that.”

He said there was “strong industry pressure to soften things and at the moment I would say the political wind is that way”.

Although regulators had to be “aware of that”, Woods said he “didn’t feel a great sense of discomfort”, adding: “I don’t think we think it’s an impossible thing to do, but it’s a challenging thing to do.”

Already PRA scrapped A cap on bankers’ bonuses inherited from the EU and diluted plans to raise capital requirements for UK banks as part of the so-called Basel accord between international regulators. In November, it also proposed rule changes to allow faster payouts of bankers’ bonuses, some of which had been deferred for years.