Deputy Bank of England governor Sam Woods has warned the City that it could face a crackdown by regulators as they try to ensure the financial system remains safe a decade on since the financial crisis.
Woods – who is chair of the BoE’s Prudential Regulation Authority (PRA) which oversees lenders and insurers – told the Telegraph that he wanted to avoid “a return to the buccaneering ‘heads I win, tails you lose’ culture that we had before the crisis”.
“I think it’s possible that as we come out of the reform phase, and enter a phase where we’re defending the reforms that have been put in place, that you may see more enforcement activity,” he said.
Woods also warned that any bankers hoping for less strict regulations after Brexit would be disappointed.
In particular, he defended the “ring-fencing” regulations that separate retail banking from riskier investment activities.
He said it makes “no sense whatsoever” for a giant global trading centre like London to let its domestic banking system be “completely jumbled up” with the riskier side of finance.
Woods’s intervention came at a time of flux for the UK’s financial watchdogs. Andrew Bailey, who was formerly head of the Financial Conduct Authority (FCA), will take up the governor’s chair at the Bank of England in March when Mark Carney steps down after eight years.
The FCA and the PRA were both formed out of the Financial Services Authority in 2013 after a regulatory overhaul.
Woods’s position at the PRA has led many to tip him to succeed Bailey as chief executive of the FCA, which focuses more on the conduct of financial institutions than their long-term safety.
The BoE deputy governor defended the FCA against accusations that it had been too lax in tackling scandals such as the one that engulfed Neil Woodford’s investment funds.
“An analogy would be if the Metropolitan Police got fiercely criticised every time there was a crime, it’s not quite like that but there’s a bit of that,” he said.
“Of course the PRA and FCA can always do things better, but I do wonder if it would be desirable to have a reset in terms of what it’s possible to achieve in terms of regulation.”