Economy9 hours ago (May 16, 2022 05:15AM ET)
© Reuters. FILE PHOTO: A view of the London skyline shows the City of London financial district, seen from St Paul’s Cathedral in London, Britain February 25, 2017. REUTERS/Neil Hall/File Photo/File Photo
LONDON (Reuters) – More than 50 economists warned on Monday that Britain’s post-Brexit plans to boost the competitiveness of its huge finance industry risked creating the kind of problems that led to the global financial crisis.
The government, seeking to use its “Brexit freedoms”, announced this month that it would require regulators to help the City of London to remain a global financial centre after the country left the European Union.
The group of 58 economists, including a Nobel Prize winner and former business minister Vince Cable, said making competitiveness an objective could turn regulators into cheerleaders for banks and lead to poor policymaking.
It also raised the risk of hurting the real economy as the finance sector sucks in a disproportionate share of talent, they said in an open letter to finance minister Rishi Sunak.
“The UK instead needs clear regulatory objectives that promote economy-wide productivity, growth and market integrity, and also protect consumers and taxpayers, advance the fight against climate change and tackle dirty money to protect our collective security,” the letter said.
Britain’s financial services minister, John Glen, has said the new competitiveness objective for the Bank of England and the Financial Conduct Authority would be secondary to keeping markets, consumers and companies safe and sound.
Banks have sought more focus on competitiveness than proposed, but the government has faced push-back from the BoE which has warned against a return to the “light touch” era that ended with lenders being bailed out during the financial crisis.
Miles Celic, chief executive of TheCityUK, a finance industry group, denied there was any contradiction between an effective regulatory regime and the proposed secondary competitiveness objective.
“Regulators in other countries, such as Hong Kong, Australia and Singapore, manage the consideration of wider policy goals such as competitiveness, or economic growth, without undermining their delivery of other policy objectives such as financial stability or consumer protection,” Celic said.
The signatories of the open letter included Mick McAteer, a former FCA board member, and Nobel Prize-winning economist Joseph Stiglitz as well as Cable, a former leader of the centrist Liberal Democrats.