Britain Reviews Plans for ‘Edinburgh’ Light Touch Regulation Following SVB Collapse

BRITAIN’S plans to re-introduce light touch regulation was being reviewed this week in light of the SVB collapse.

UK prime minister Rishi Sunak and chancellor Jeremy Hunt have seeking regulation of the country’s financial services to make it more attractive post-Brexit. Known as the Edinburgh Reforms, these are now being re-considered.

Vicky Saporta, executive director for prudential regulation at the BoE, said last month that the legislation was “a big deal” and would “make a big difference” to the way it regulated banks.

However, the government was now being urged to be far more cautious. “The Treasury must be careful not to follow the US example and weaken regulation in the name of competition,” said Lord Nick Macpherson, a Treasury permanent secretary in the years before and after the 2008 banking crash. :

Observers said the Bank of England was likely to come under pressure over its plans for a “strong and simple” regulatory regime for smaller banks, which is meant to reduce red tape and boost competition, including by exempting them from some of the rigours of the Basel global industry standards.

Treasury insiders meanwhile were reported to have accepted that the Bank of England may now have to give “more prominence” to the risks posed by a single sector having such a big concentration in a single bank. SVB was heavily exposed to the tech industry worldwide.

However, Andrew Griffith, City minister, has insisted that the rescue operation for SVB UK, under which HSBC on Monday agreed to acquire the stricken bank for £1, showed that “the system has worked as intended”.

Under the Edinburgh Review, Chancellor Jeremy Hunt is seeking a financial services and markets bill which would give regulators a “secondary objective” of promoting economic growth and City competitiveness, alongside the main goal of financial stability.

Now following the SVB failure, Labour has called for a systemic review of the risks that rising interest rates pose to the UK financial sector.

Tulip Siddiq, the opposition City minister, also asked the Treasury and BoE what assessment they made of “the significant liquidity risks arising from [SVB UK’s] deposit base being a small number of high-value corporate deposits”.

The House of Commons Treasury select committee will on March 28 take evidence from BoE governor Andrew Bailey about the collapse of the SVB UK and its sale to HSBC.

Article Credit: https://www.amlintelligence.com/2023/03/news-britain-reviews-plans-for-edinburgh-light-touch-regulation-following-svb-collapse/