Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Bank official sounds alarm over ‘free-lunch’ City deregulation

Bank official sounds alarm over ‘free-lunch’ City deregulation

Insurance regulator says post-Brexit softening of rules will put billions of pounds of pension saving at risk

A deputy governor at the Bank of England has sounded the alarm on City deregulation, saying a proposed softening of the rules for finance companies would put billions of pounds of pension fund savings at risk.

Speaking out against a draft law championed by Rishi Sunak while he was chancellor, BoE deputy governor Sam Woods said the changes, which could allow insurers to reduce their cash reserves which are supposed to act as a buffer against sudden downturns, were “unbalanced”.

The UK’s life insurance industry, which specialises in managing retirement savings, directly invests about £1.3tn in savings held in an estimated 21m individual pension pots.

In a forceful intervention, Woods said: “Leaving the EU should not lead us to lower standards of financial regulation in the UK.

“Changing prudential regulations in the UK should not be simply a one-way street, particularly where that would mean weakening protections for business which serves groups such as pensioners.”

In addition to his role at the Bank, Woods is chief executive of the Prudential Regulation Authority, which polices banking and insurance companies.

Speaking at an online event on Friday, Woods said reform of insurance capital rules should not lead to weaker controls. “I worry that some might consider such a thing to be a free lunch, but in fact less capital, fewer checks and fewer restrictions on assets, with no steps to strengthen the part of the regime where that is needed, means more risk for pensioners and other policyholders.”

The Bank of England inherited regulation of rules governing the finance industry following the 2008 financial crash. It was widely recognised that the previous watchdog had allowed banks and insurers to cut their reserves, leaving them with little capital in a time of crisis.

With the Treasury, the BoE set up the Prudential Regulation Authority, which oversees 1,500 City firms, to take a tougher line.

Changing insurance rules known as Solvency II that were inherited from the European Union is seen by the government as a key Brexit “dividend” for Britain’s financial industry.

Jacob Rees-Mogg, the Brexit opportunities minister, has called for a rewriting of EU financial rules to trigger an “investment big bang” in Britain powered by the City of London.

However, the pace and substance of the reform has dismayed insurers at a time when the EU has pressed ahead with its own amendments.

A draft UK law was due to be unveiled this month to implement insurance and other reforms, but rows between No 10 and the Treasury forced the legislation to be delayed.

“The world won’t implode if we don’t have a City minister for a day or two. I think we are going to get one very soon,” Woods said.

“It may of course be the case, given the political situation, that the government needs to take a bit longer to take decisions,” Woods said.

The draft law gives the Bank powers to change Solvency II in a way Woods said would release the equivalent of 10-15% of the current capital held by life insurers, which could support between £45bn and £90bn in additional investment in the economy.

The Bank has proposed amending three core parts of Solvency II to make it easier for insurers to invest in long-term assets like infrastructure to help Britain meet net zero targets.

Woods said there was general agreement on two of them, but there was opposition to the third, which relates to the so-called matching adjustment (MA), which allows insurance companies to recognise future income from investment returns as current capital.

“In our view, a package which did not tackle the issues we have identified with the matching adjustment would be seriously unbalanced,” Woods said.

It would remove those elements insurers wanted to jettison, he said, adding that the MA already accounts for capital relief equivalent to two-thirds of the entire capital base of the life insurance industry.

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Munich Airport Reopens After Second Drone Shutdown
Pro Europe and Anti-War Babiš Poised to Return to Power After Czech Parliamentary Vote
Sean ‘Diddy’ Combs Sentenced to Fifty Months in Prison Following Prostitution Conviction
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
The Personality Rights Challenge in India’s AI Era
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Study Finds No Safe Level of Alcohol for Dementia Risk
Trump Says Ukraine Can Fully Restore Borders with NATO Backing
Europe Signals Stronger Support for Taiwan at Major Taipei Defence Show
Germany Weighs Excluding France from Key European Fighter Jet Programme
Cyberattack Disrupts Check-in and Boarding Systems at Major European Airports
Björn Borg Breaks Silence: Memoir Reveals Addiction, Shame and Cancer Battle
When Extremism Hijacks Idealism: How the Baader-Meinhof Gang Emerged and Fell
JWST Data Brings TRAPPIST-1e Closer to Earth-Like Habitability
Trump Orders $100,000 Fee on H-1B Visas and Launches ‘Gold Card’ Immigration Pathway
France’s Looming Budget Crisis and Political Fracture Raise Fears of Becoming Europe’s “Sick Man”
Three Russian MiG-31 Jets Breach Estonian Airspace in ‘Unprecedentedly Brazen’ NATO Incident
European manufacturers against ban on polluting cars: "The industry may collapse"
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
Christian Brueckner Released from German Prison after Serving Unrelated Sentence
World’s Longest Direct Flight China Eastern to Launch 29-Hour Shanghai–Buenos Aires Direct Flight via Auckland in December
New OpenAI Study Finds Majority of ChatGPT Use Is Personal, Not Professional
The conservative right spreads westward: a huge achievement for 'Alternative for Germany' in local elections
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
U.S. and China Agree on Framework to Shift TikTok to American Ownership
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
The New Life of Novak Djokovic
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
Poland Shoots Down Russian Drones in Airspace Violation During Ukraine Attack
Apple Introduces Ultra-Thin iPhone Air, Enhanced 17 Series and New Health-Focused Wearables
Macron Appoints Sébastien Lecornu as Prime Minister Amid Budget Crisis and Political Turmoil
Vatican hosts first Catholic LGBTQ pilgrimage
Apple Unveils iPhone 17 Series, iPhone Air, Apple Watch 11 and More at 'Awe Dropping' Event
France joins Eurozone’s ‘periphery’ as turmoil deepens, say investors
×