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Bank executives are making a last-ditch push to dissuade the UK Treasury from appointing the former senior US financial regulator Michael Hsu as the next chief supervisor of British lenders and insurers, according to people briefed on the situation.
The lobbying drive underlines the importance attached by the banking sector to who will succeed Sam Woods as chief executive of the Bank of England’s Prudential Regulation Authority, given his influential role in shaping financial regulation since the 2008 financial crisis.
Some City of London executives would prefer the job to go to Katharine Braddick. She joined Barclays four years ago as the UK bank’s head of strategic policy after two decades in the public sector at the Treasury, the PRA and Britain’s main financial watchdog.
The internal candidate is David Bailey, executive director for prudential policy at the PRA. While he is seen as having solid credentials, Rachel Reeves may prefer an external candidate to underscore the government’s push to make regulation more growth-friendly.
People briefed on the discussions said Hsu, who stepped down as head of the US Office of the Comptroller of the Currency a year ago, was one of the frontrunners to take over from Woods when his mandate expires at the end of June.
Hsu, who formerly worked at the US Federal Reserve and would be the first American to take on the PRA role, is a rare dissenting voice on bank deregulation and has previously warned that lighter oversight could lead to a financial crisis.
“He’s seen as a capital hawk,” said one financial executive. “The sector really doesn’t want him to get the PRA job — some of the American banks are very worked up about it.”
Hsu has also previously expressed concerns about cryptocurrencies, comparing them to the toxic products that presaged the 2008 crash, at a time when banks are trying to get comfortable with the asset class.
One financier said that appointing the former OCC boss could make UK relations with Donald Trump’s US administration awkward, since Hsu was appointed under Joe Biden, the former Democratic president.
Banks are enjoying a long-awaited rehabilitation in the minds of regulators following the 2008 financial meltdown, with the US leading the charge on deregulation.
Trump administration officials have moved to ease bank rules and free up capital for lending, steps that lenders across the Atlantic hope will be replicated by their own regulators.
UK bankers have also been quietly celebrating coming off “the naughty step”, as City minister Lucy Rigby put it last year, after avoiding an increase in bank tax in the autumn Budget and talk of lighter regulation to spur growth.
The PRA, which is part of the BoE, regulates the UK’s main banks and insurers. Since Brexit it has been given extra powers to draw up regulation for the sector.
Woods is closely associated with the introduction of many post-crisis restrictions on the financial sector, such as the rule requiring banks to ringfence their retail operations from their riskier investment banking businesses.
This rule is under review by the government and many banks have been lobbying for its abolition.
A panel of experts, led by the Treasury, interviewed candidates for the PRA job last month and Reeves is expected to announce Woods’s successor in the coming weeks.
Alongside Braddick, Bailey and Hsu, the panel also considered Adrienne Harris, another former US regulator who stepped down as head of the New York Department of Financial Services last year. But people briefed on the process said Harris was out of the running.
The Treasury, the BoE, Bailey, Braddick, Harris and Hsu all declined to comment.