UK Finance Minister Rachel Reeves pledged to make “necessary”, “urgent” and “extremely difficult” choices to restore the country’s economic stability.
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Finance Minister Rachel Reeves pledged on Thursday to restart regulation of Britain’s “crown jewel” financial sector, which she said had shackled the City of London’s global prospects and held back the British economy since the global financial crisis. increase.
Reeves vowed not to take Britain’s status as a global financial center for granted and promised a series of growth-focused reforms to win and keep it, according to excerpts of her first official residence speech shared with the media. status.
Her speech came as leaders across the industry braced for a potential regulatory bonfire on Wall Street during President-elect Donald Trump’s second term, with tax cuts and easing of capital regulations that could expand U.S. banks’ relationship with Profit gaps among global competitors.
“While the regulatory reforms introduced by successive governments after the global financial crisis were correct to ensure that regulation kept pace with the global economy at the time, it is important that we learn from the lessons of the past,” she said.
“These changes have created a system designed to eliminate risk-taking behaviour. This has gone too far and in some places has had unintended consequences that we must now address.”
Excerpts show the former Bank of England economist will propose five priority growth opportunities to maximize the growth potential of the UK financial services sector, namely capital markets, fintech, sustainable finance, asset management and wholesale services and insurance and reinsurance.
She said the first financial services growth and competitiveness strategy would be published in the spring as a roadmap for growth and cement the sector’s place at the heart of the government’s ten-year industrial strategy.
“The UK has been regulating risk but not growth,” the chancellor said. He has written to policymakers to remind them of their responsibilities around growth and market stability.
Reeves and Prime Minister Keir Starmer promised voters at July’s election that they would transform Britain into the fastest-growing economy in the Group of Seven nations after years of sluggish growth.
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As well as rebalancing rules to curb risks, the government is exploring how to help financial firms reduce the costs associated with supervising junior managers and is proposing a shake-up of the so-called certification system.
The UK is taking further action to boost the UK’s flagging capital markets, pledging to establish PISCES, the world’s first regulated market for trading private company shares in a tax-efficient manner, by May 2025.
The pledge to increase investment in capital-starved British businesses complements plans outlined on Wednesday to create a series of “megafunds” in what the government says is the biggest overhaul of UK pensions in decades.
Reeves wants to merge some 60 defined contribution pension schemes and 86 local government pension schemes into eight structures large enough to fund ambitious infrastructure projects and under-supported growth businesses.
A sharp decline in the domestic asset allocation of UK pension funds – expected to hold £1.3trn in assets by the end of the decade – is widely seen as a key reason for the UK’s lackluster economic growth.
Keeping in mind his manifesto commitment to make the UK a global center for transformational finance, Reeves said the government would join forces with the City of London Corporation to establish a Transformation Finance Commission.
The Treasury will also publish draft legislation for tighter regulation of ESG rating providers, as well as a consultation on the value case for the UK Green Taxonomy, to boost investor confidence in sustainable companies.
The Chancellor also committed to consulting on the use of future UK sustainability reporting standards for disclosures by economically significant companies.
Reeves said that in response to one of the financial industry’s biggest scourges, she and the interior and science ministers have set March 2025 as a deadline for tech and telecoms companies to show how they can reduce fraud on their platforms.
