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Britain’s Truss backs powers to override financial watchdogs, says FT

By:
Reuters
Updated: Aug 10, 2022, 09:21 UTC

LONDON (Reuters) - Liz Truss, the front-runner to become Britain's next prime minister, will give ministers powers to override financial regulators if they hold back post-Brexit reforms, the Financial Times reported on Wednesday.

Conservative Party hustings in Darlington

LONDON (Reuters) -Liz Truss, the front-runner to become Britain’s next prime minister, would give ministers powers to override financial regulators if they hold back post-Brexit reforms, the Financial Times reported on Wednesday, after insurers urged action.

Britain’s departure from the European Union allows it to write its own rules for the City of London, one of the world’s biggest financial centres but now largely locked out of the EU and facing competition from Paris, Amsterdam and Frankfurt.

The government unveiled a draft law last month to reform financial rules, including easing insurers’ capital rules known as Solvency II, which were inherited from the EU.

Finance minister Nadhim Zahawi left out a proposal that would allow the finance ministry to “call in” or actually override a regulator, saying he wanted more time to consider the arguments.

The FT said Truss would “definitely” press ahead with inserting the call-in power into the bill, which is now making its way through parliament and is due for final approval in 2023. Her team did not respond to a request for comment.

Insurers have said the Bank of England is being too conservative, holding back capital that could be used to invest in infrastructure. The Bank warns there is “no free lunch” as policyholders must be protected.

“As the regulator’s consultation proposal stands at the minute, they would not allow us to release more capital to invest in UK infrastructure,” Amanda Blanc, chief executive of insurer Aviva, told reporters on Wednesday.

The EU is also reforming insurance capital rules and is ahead of Britain, which has yet to set out final proposals.

“Yes, Europe are loosening those rules, they plan to do that next year, so it would be really good if we could get on with it,” Blanc said.

BoE Governor Andrew Bailey has warned that independent regulators were central to Britain’s standing as an international financial centre.

The new financial services bill already includes a new objective for regulators to maintain UK finance’s international competitiveness, which some lawmakers worry will mark a return to pre-financial crisis “light touch” regulation.

Truss has also said she wanted to take a look at the BoE’s mandate for containing inflation, which is forecast to hit 13% later this year as the BoE hikes interest rates.

Truss faces former finance minister Rishi Sunak in a Sept. 5 vote by the Conservative Party to choose a new prime minister.

(Reporting by Huw Jones and Carolyn Cohn; Editing by Kate Holton and Philippa Fletcher)

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