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UK banks are celebrating the most favourable regulatory environment since the financial crisis, top executives told the Financial Times, as regulators ease rules and the government turns to the sector to help revive growth.
“The financial crisis was obviously quite some time ago now,” City minister Lucy Rigby told the FT Global Banking Summit. “I think there is an extent to which . . . from a narrative point of view, we don’t want banks to be any longer on the naughty step.”
Bank executives queued up at the London summit to welcome the UK’s more business-friendly tone, praising the new era of open dialogue and a recognition of the importance of financial services to the British economy — while calling for further easing of regulation.
“I don’t think there has been an environment for financial services that has been as supportive and positive since the financial crisis,” said Charlie Nunn, chief executive of Lloyds Banking Group. “The narrative has changed significantly, but we are not there yet.”
The City of London has enjoyed a rehabilitation of its image, which was shredded after the 2008 bailouts.
Chancellor Rachel Reeves last month spared banks an increase in the sector levy in her Budget and the Bank of England this week cut its estimate of how much capital lenders need.
Conor Hillery, JPMorgan Chase’s co-head of Europe, Middle East and Africa, said the BoE lowering its estimate of minimum capital levels for banks after they passed its latest stress tests had been “well received”.
“We had draconian rules post-crisis, understandably, particularly around capital and liquidity. Lots of people said they went too far,” he said.
Since winning last year’s election, the Labour government has doubled down on the drive to lighten the burden of regulation for the financial services sector that began under the previous Conservative administration.
Paul Thwaite, chief executive of NatWest, said regulators had started to shake off the focus on risk prevention that dominated after the 2008 banking crash, praising the way they recently stimulated a rise in mortgage lending by loosening rules in this area.
“Over the course of the last decade society has looked to manage down risk or manage away risk,” said the boss of NatWest, which only returned to full private ownership in May after its crisis-era bailout.
As banks seek to rapidly adopt artificial intelligence, the UK’s top financial watchdog said it was taking a totally different approach to regulating AI. Instead of writing new rules, the Financial Conduct Authority will encourage innovation and accept that “there will be bumps in the road”.
“There needs to be a different relationship between regulator and regulated,” FCA chief Nikhil Rathi told the summit. “We are not going to come after you for everything that goes wrong — what we will be concerned about is egregious failures that are not dealt with.”
Thwaite said there was still room to ease rules further.
“In fairness to the UK regulators, I think what we’ve seen over the last 12 to 18 months is a willingness to start to have the debate,” he said. “I’d say we’re closer to the start line than the finish line.”
Although many executives characterised the rehabilitation of banks’ reputations as long overdue, there were also warnings that periods of deregulation often come shortly before another crash.
“Across the industry, risk management, capital adequacy, governance and compliance have all improved substantially since the crisis era,” said Evgueni Ivantsov, chair of the European Risk Management Council.
“That said, I think that we cannot afford to become complacent,” he added. “Traditional risks, emerging threats such as AI, crypto assets, cyber dependency and rapid societal transformation are creating uncertainty. This is a fertile ground for the next potential ‘perfect storm’.”