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It looks like central Banks also have a tendency to procrastinate. First, Jerome Powell “pleased” markets with an extra hawkish speech, then the head of the Bank of Japan stunned investors by raising the upper limit of the yield peg to 0.5%, from 0.25%. At the same time, it left its short-term policy rate unchanged in the negative, at -0.1%.
Now it could be Britain’s turn to surprise as the regulator prepares for “Thatcher-like” changes with so-called Edinburgh Reforms. The main idea of the new head of the Treasury Department, Jeremy Hunt, is to loosen financial regulation as part of a rebuilding of the country’s international competitiveness. In other words, the head of the regulator decided to implement the laissez-faire principle.
According to WSJ, the plan includes easing of the “ring-fencing” separating retail and investment banking, scrapping the cap on bankers’ bonuses, overhauling the regime that makes senior managers responsible for infractions and repealing aspects of European Union rules. On top of that, officials want to lower taxes on asset managers and make it easier to raise capital in the U.K.
In short, along the lines of the Thatcher government, Hunt & Co. want to restore London’s status as the world’s largest financial center. Will it actually help the economy? Only time will tell…
In the meantime, some believe that the country would have done better if Brexit hadn’t taken place. While there would be more bureaucratic fuss, the Capitol’s ability to sell financial services to the EU would be much broader. EY estimates that 7,000 finance jobs have moved to cities such as Paris and Amsterdam because of the country’s exit from the bloc.
Overall, liberalization of the financial sector is certainly a good thing, but will it be enough? Looks like the Finance Ministry will still have to think hard about attracting investment into the country. One of the options will be the development of an industry or the introduction of exemptions for IT companies, as, for example, they did in Ireland…
