By Huw Jones
LONDON (Reuters) - Britain's finance ministry said on Wednesday it would not give itself a veto over decisions taken by financial regulators, scrapping a plan the Bank of England had warned would undermine its independence and backfire on the financial sector.
Since Britain's departure from the European Union, the country can write its own financial rules, with regulators gaining more powers that need balancing by accountability, the government has said.
UK financial services minister Andrew Griffith had said in October he would propose an "intervention power" allowing the ministry to require the Bank of England and Financial Conduct Authority to scrap or change a rule, if in the public interest.
The proposal was delayed earlier this month.
"The Government has decided not to proceed with the Intervention Power at this time," Griffith said in a statement on Wednesday.
Regulators had asked Griffith not to "politicise" rule-making.
Bank of England Governor Andrew Bailey warned the government that a veto power would threaten the financial sector's competitiveness, and complicate efforts to restore Britain's reputation after recent turmoil in UK bond markets.
The power was to have been inserted into the financial services and markets bill now being approved in parliament.
"Having consulted further, we are of the view that the existing provisions in the Bill are currently sufficient and will already allow us to seize the opportunities of Brexit by tailoring financial services regulation to UK markets to bolster our competitiveness," Griffith said.
"We remain committed to the operational independence of the financial services regulators."
The bill will require regulators to take the sector's competitiveness into account when writing rules. It also gives ministers powers to ask regulators to review a rule, though the final decision on any change would be left to the watchdogs.
The ministry has also promised a "Big Bang 2.0" reform of the financial sector to maintain its global competitiveness.
(Reporting by Huw Jones; Editing by Jonathan Oatis and Mark Potter)