Yahoo Finance Jeremy Hunt to press ahead with ‘Big Bang 2.0’ despite banking crisis
Jeremy Hunt has committed to banking reforms intended to make the City of London more competitive, despite fears that looser regulation will introduce yet more risk to a fragile financial system.
A Treasury source confirmed that plans to slash red tape – dubbed “Big Bang 2.0” to draw parallels with Margaret Thatcher's overhaul of the Square Mile – will be brought forward unchanged in the wake of the rescues of Credit Suisse and the UK arm of Silicon Valley Bank (SVB).
The Swiss government on Tuesday ordered Credit Suisse to suspend the payment of all deferred bonuses awarded before 2022 amid anger over the bank’s failure.
The Chancellor told peers on Tuesday that some deregulation could boost the financial stability in the UK.
Mr Hunt told the House of Lords Economic Affairs Committee: “Sticking with the status quo is not necessarily the best thing to do to ensure financial stability.”
He was quizzed on whether he would reconsider his so-called Edinburgh Reforms, set out in December. They include relaxing ring-fencing rules on smaller banks, mandating financial regulators to focus on boosting economic growth and loosening rules that hold bankers personally responsible for rule breaking on their watch.
He said: “I made it very clear when we announced the Edinburgh Reforms that we would not unlearn the lessons from the financial crisis.
“I think you will see when we publish our recommendations as to which reforms we want to proceed with that we recognise the importance of the protections that have been put in place and we don't want to undermine them.”
Sam Woods, the head of the Bank of England's Prudential Regulation Authority, has warned that “the reform package as a whole increases risk”.
A Treasury source said that the recent crisis engulfing the banking industry has not affected the Chancellor’s approach to the Edinburgh Reforms.
He said: “There has been no change whatsoever because none of them have anything to do with Britain’s regulatory system.”
The comments came as Janet Yellen, the US Treasury secretary, signalled that the US government would extend support to smaller lenders in a bid to shore up confidence in the country’s banking system.
Ms Yellen indicated that the US government could provide further backing for deposits at smaller American banks if needed, sending shares in embattled regional lender First Republic up by more than 50pc.
Ms Yellen said: “The steps we took were not focused on aiding specific banks or classes of banks. Our intervention was necessary to protect the broader US banking system. And similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.”
It comes after the US government guaranteed all SVB deposits and launched an emergency lending facility in a bid to calm fears following the tech lender’s collapse.
However, a number of regional lenders have since struggled to arrest a wave of customer withdrawals, which forced Wall Street giants to provide a $30bn (£24.6bn) lifeline last week to prop up California’s First Republic.
Meanwhile, stock markets rebounded on Tuesday as concerns surrounding the cut-price takeover of Credit Suisse by arch-rival UBS cooled.
London’s FTSE 100 index climbed 1.7pc, driven by a rise in banking stocks, with NatWest and Barclays both jumping around 5pc.
Reassurances from the Bank of England and European Central Bank (ECB) that shareholders will take losses ahead of so-called AT1 bondholders in any future collapse calmed investor fears in Europe.
They had begun reassessing their portfolios after Swiss regulators wrote down $17bn of AT1 bonds under UBS's takeover of Credit Suisse but left shareholders with some value in a highly unusual move.
Lawyers acting on behalf of Credit Suisse bondholders said they plan to launch a legal case against the Swiss government through the court system, while also mounting a challenge through international arbitration.
The fallout for Credit Suisse employees continued on Tuesday with UBS reportedly preparing to axe tens of thousands of jobs following the deal.
