Britain should create a new body to promote a positive “vision” for banking and cut taxes on the industry after failing to support the sector adequately ahead of Brexit, banking trade body UK Finance’s chair said on Wednesday.
Britain is due to leave the European Union on October 31, but so far has not secured an exit deal.
To avoid disruption, London-based banks have moved some staff and activities to new hubs in the European Union to maintain customer links, raising questions about the capital’s future clout in global finance.
The government dropped its support for the finance industry’s proposal for mutual recognition post-Brexit to focus instead on a more generous form of future market access to the EU than normally given to non-EU countries.
“I do not think it’s unfair to say that since the financial crisis and particularly during the Brexit negotiations, our sector and services generally have seen nothing like the level of strategic support and attention from government that has been granted to goods and to technology,” Bob Wigley told the UK Finance’s summer reception.
Wigley said the government should create a new, formal body made up of regulators, government officials and the Bank of England governor to set out a positive national vision for the role of the finance industry.
The aggregate rate of tax paid by banks in New York and Frankfurt is much lower than in London, he said.
“This cannot be sustainable post Brexit without an even larger outflux of international banks than Brexit itself may deliver,” Wigley said.
UK Finance members like RBS and Lloyds had to be bailed out by taxpayers during the financial crisis that ushered in years of belt-tightening for millions of Britons.
As a result, the industry is considered still too unpopular for politicians to be seen supporting it even though finance is Britain’s biggest economic sector, generating an annual trade surplus of about 70 billion pounds.
“With the loss of passporting on Brexit, we will need to find ways of making the UK internationally attractive if we are to retain and attract international banks here,” Wigley said.
Banks were not pitching for a return to pre-financial crisis light regulation, though better coordination among regulators was needed, he said.
“Right now, we are seeing a multitude of new regulatory interventions being delivered by multiple regulators with at best insufficient coordination and at worst conflict,” Wigley said.
“So the first thing this body needs to do is ensure that regulatory initiatives are formulated and implemented with what we call effective air-traffic control – prioritisation and orderly implementation.”
He called for a review of rules to ease the burden on mid-tier and smaller banks, saying poor promotion of competition in the sector meant there is only one mid-tier bank with assets over 50 billion pounds.
He singled out a letter from the Bank of England last week telling 20 small “challenger” banks they needed better controls as they could underestimate the impact of a downturn on their loan books.
It “illustrates an embedded anti-growth, anti-competition bias within the system” that a new body should correct, Wigley said.
In a week when Facebook said it was looking to launch its own crypto currency to expand into payments, Wigley said that “Big Tech” firms moving into banking services should be regulated in a similar way to banks.
“Regulation 2.0 needs to be developed to deal with their business models,” Wigley said.
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