The UK is relaxing banking rules to regain financial sector jobs and leverage lost in the wake of the Brexit vote

The UK government has announced plans to relax rules for banks and other financial institutions in a bid to regain jobs and investment lost since the Brexit vote in 2016.

Reland is among the big winners in this process, as around 36 UK-regulated companies moved at least some of their operations and 1,200 finance jobs here in the five years following the vote, according to research by financial services firm EY. These included large-scale relocations by global banks Barclays and Citigroup, as well as dozens of smaller firms moving just one or two people to Ireland.

A total abolition of salary caps for bankers and a higher bar to punish executives and directors for misconduct under their supervision are among the new UK measures. They aim to directly address decision-makers whose responsibilities have been tightened and bonuses cut in the wake of the losses sustained during the global financial crisis across the European Union.

According to Diarmaid Sheridan, financial services analyst at Davy Stockbrokers, the moves are unlikely to boost UK operations by Irish banks, including AIB and Bank of Ireland, but could weigh on Ireland as a location for future investment by global investment banks.

The proposed derogation from Europe’s Solvency 2 regime would also make it easier for insurers, which manage trillions in assets, to allocate capital to climate-friendly investments, unlike in the EU, which has rules that funds are slung into the lowest-risk bond options, he stated.

While a decade ago UK regulators led the push for tougher financial regulation, Britain now sees its position outside the EU as an opportunity to undermine that regime in a bid to reclaim lost investment and reassert the City of London financial district as Europe’s pre-eminent financial hub .

That status suffered a symbolic blow in November when Paris’ Euronext exchange overtook London as Europe’s most valuable exchange – albeit briefly. Amsterdam overtook London as Europe’s busiest stock exchange last year.

UK Treasury Secretary Jeremy Hunt denied that the decision to abolish post-crash rules would risk repeating factors leading to this crisis.

“It makes perfect sense to make pragmatic changes like the ones we’re announcing today,” he said at a Financial Times event.

“But we are doing this very, very carefully to ensure that the UK is a competitive, exciting place to live and invest, but also that we don’t lose the guard rails that we set out after 2008.

The package of more than 30 changes includes removing a cap on banker bonuses and relaxing capital requirements for smaller lenders. The UK also said it would review rules holding bankers accountable for their decisions and relax demarcation rules meant to separate risky investment banking from retail business – rules created after high-risk lending and the so-called “Casino banking” were blamed for triggering a 2008 global financial crisis.

It remains to be seen whether the promise of looser regulation will be enough to counteract reduced access to the EU. The UK is relaxing banking rules to regain financial sector jobs and leverage lost in the wake of the Brexit vote

Fry Electronics Team

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