Rishi Sunak is set to push ahead with plans to give ministers the power to overrule decisions made by City regulators.
The Treasury has confirmed the government will still go-ahead with the Liz Truss and Kwasi Kwarteng initiative, despite concerns from the Bank of England about the measure.
The new call-in power will see ministers able to overturn decisions made by financial regulators like the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) if it is deemed in the “public interest”.
City minister Andrew Griffith recently said the power would only be used when a regulatory decision has unintended consequences for other areas of public policy.
He said it would only be a “safety valve” and would be attached to the Financial Services and Markets Bill, currently going through parliament, by the government.
The Treasury told the Financial Times: “We have confirmed our intention to bring forward an amendment to the financial services bill, to include an ‘intervention power’, that will enable the Treasury to direct a regulator to make, amend or revoke rules where there are matters of significant public interest.”
It comes as a part of the UK’s upcoming overhaul of retained EU financial services regulations, which Sunak has said previously will herald a “Big Bang 2.0” – a reference to the success of the City after deregulation in the 1980s.
Allies of Truss said during the Tory leadership contest that she would introduce the call-in power in what was perceived as an attack on the independence Bank of England, which oversees the PRA, and other regulators.
Bank of England governor Andrew Bailey has raised concerns about the intervention power privately and said “anything that would weaken the independence of regulators would undermine” the City’s global reputation in a letter to the Treasury Select Committee earlier this year.
FCA chief Nikhil Rathi said during a meeting of City bosses last week that it is “vital” that regulatory “independence and agility at speed [is] not undermined by any proposed call-in power”.
Matthew Nunan, partner at Gibson Dunn law firm and ex-FCA worker, told City A.M. that “history has shown that politicians do not always apply the same level of thoughtfulness to their decisions” as regulators.
“Regulators are often criticised for being slow but that is because they make evidence based decisions,” he said.
“Companies come to the UK because of the stability of the legal system and the predictability and transparency of decision making – to replace this with what could be seen as arbitrary or unduly political decisions would be to undermine what makes the UK a leader in financial services today.”