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The cap on bankers’ bonuses, an element of insurance regulation and the full weight of rules on challenger banks and building societies could be rolled back after Brexit, the governor of the Bank of England has suggested.
Insisting that such changes to financial regulation would not amount to a “race to the bottom”, Mark Carney laid out the list on Wednesday as elements of rules that the UK could change after it leaves the European Union.
“There are things we don’t think are necessary,” Mr Carney told a City of London audience. “There are areas where we would make changes but in the context of keeping the overall standards.”
The City is divided as to how much divergence from Brussels rules the UK should contemplate as Brexit looms. Some say it is an opportunity to cast off overly burdensome rules, while others say it is important to tack close to the EU because retaining access to the single market could hang on whether the EU deems the UK to have an “equivalent” set of rules.
The BoE and the financial regulator, the Financial Conduct Authority, have insisted that there will not be a “bonfire of regulations” post-Brexit.
But Mr Carney’s statement is the clearest signal yet that the UK authorities think some areas ripe for reform.
The UK and the EU have long clashed over the bonus cap, with the UK threatening to legally challenge the measure before eventually introducing the measure.
There have also long been UK questions about the fairness of the so-called risk margin, an element of the EU’s Solvency II insurance rules that were introduced nearly two years ago.
Most strikingly, Mr Carney confirmed that UK regulators do not think that the full weight of global rules for banks should be applied to building societies and challenger banks.
“We think in general there should be more proportionate regulation,” Mr Carney said, building on comments made by his deputy and top banking supervisor, Sam Woods.
Mr Carney also chairs the Basel-headquartered Financial Stability Board, which makes recommendations to the G20 countries and whose prominence spiked during the financial crisis.