The City of London, the administrator of the financial district of the United Kingdom, is reportedly grappling with concerns about the district’s competitiveness and the need for foreign investment.
The city’s policy leader, Chris Hayward, emphasized the importance of attracting foreign investment to boost growth and enhance the financial sector’s global competitiveness while addressing the House of Lords’ financial services regulation committee Wednesday (May 22), Reuters reported Wednesday.
However, Hayward argued that the current regulatory mindset lacks the characteristics necessary to achieve these goals, according to the report.
The financial sector has faced challenges since the U.K. departed from the European Union and has seen U.K. companies considering listing in New York instead, the report said.
Hayward said the current regulatory mindset is hindering growth and the financial sector’s international competitiveness, per the report. He said regulators, particularly the Financial Conduct Authority (FCA), have not fully embraced risk-taking and growth promotion. To address this issue, Hayward suggested the establishment of a new public-private body that can actively attract foreign investment.
Recognizing the need for change, the FCA and the Bank of England’s Prudential Regulation Authority have been given a secondary objective of aiding growth and the financial sector’s international competitiveness when formulating rules, according to the report. However, skepticism remains about the effectiveness of this approach.
Hayward emphasized that the new remit alone is insufficient to boost inward investment and growth. He advocated for the creation of a dedicated promotional body to enhance the U.K.’s competitiveness compared to countries like Ireland, the report said.
Hayward asserted that parliamentary backing is essential to support regulators in accepting more risk, arguing that the fear of retribution when things go wrong often hinders regulators from taking necessary risks, per the report.
The debate surrounding the FCA’s “naming and shaming” plans — under which the financial watchdog would publicly disclose companies under investigation — highlights the importance of clarity in regulators’ statutory duties, according to the report.
Committee member Jonathan Hill suggested that regulators should distinguish between their obligations and discretionary actions that may impede growth and competitiveness, per the report.
