Sunak abandons plans to overrule City regulators after Bank backlash
RISHI SUNAK has abandoned plans to give ministers the power to overrule City regulators in a major climbdown by the Prime Minister.
Andrew Griffith, the City minister, said the Government has decided not to proceed with a so-called “call-in” power in a move that will be seen as Mr Sunak bowing to pressure from the Bank of England and the Financial Conduct Authority.
The climbdown sparked an immediate backlash from Conservative backbenchers last night. Jacob Rees-mogg, a former business secretary, said: “This is a loss of democratic accountability. The power exists to override the Bank in extremis and it is a sensible emergency provision to deal with over mighty regulators. I am surprised the Government has backed down.”
The decision comes just a day after Mr Sunak also pulled a vote on its housebuilding plans after dozens of Conservative MPS threatened the first major rebellion of his premiership.
Regarded as a flagship policy for Mr Sunak, the call-in power was supposed to give ministers an ultimate veto over decisions taken by the FCA and the Bank’s Prudential Regulation Authority. It was first proposed in the dying weeks of Mr Sunak’s time at the Treasury.
Supporters of the policy argued it would help keep the City competitive, reduce red tape and bring more demo- cratic accountability to regulation.
However, the proposal led to a public backlash from the City’s two main watchdogs, who argued it would undermine their authority and weaken Britain’s reputation for sound financial regulation. Last month, Sam Woods, deputy governor of the Bank and head of the PRA, used a keynote address at the annual City Dinner in the Mansion House to hit out at the plan, saying a call-in power would harm the City’s competitiveness, undermine its international credibility and create a system in which “financial regulation blew much more with the political wind”.
Richard Lloyd, interim chairman of the FCA, said the power would undermine the regulator’s independence.
He told MPS on the Treasury select committee: “Even if it’s used very sparingly... the perception that comes with the ability of ministers to direct independent regulators will go to undermining our independence. We have been very clear to ministers that this is of great concern to us.”
Last night, Mr Griffith said: “Having consulted further, we are of the view that the existing provisions in the Bill are currently sufficient and will already allow us to seize the opportunities of Brexit by tailoring financial services regulation to UK markets to bolster our competitiveness.
“We have always been keen to find the right balance between increased responsibility for the regulators, with clear accountability, appropriate democratic input, and transparent oversight. We remain committed to the operational independence of the financial services regulators.”