Bank of England governor Andrew Bailey has sent a strong warning to the next prime minister not to interfere politically in the regulation of the City of London, saying that it would hit the country’s competitiveness. In a letter to the House of Commons Treasury select committee, Bailey said political interventions - to be achieved through the government’s new financial services bill - could have the opposite effect to that intended and make the UK less competitive.
Bailey said that there was a need for “parliament, stakeholders and the public at large to hold regulators to account fully” but made no mention of the proposed new power for ministers to look over the shoulders of regulators.
Sunak proposed the “public interest” call-in power following frustration that City regulators were not acting radically enough in reviewing EU legislation, notably to free capital for investment.
Bailey has been scrupulous in not talking about the different plans Sunak and Truss have put forward, insisting that “it is not for the BoE to get involved in the leadership election”. But he has said that he does not think there is a need to change the structure of monetary policy or financial regulation.
In the UK, the government sets the objectives for monetary policy, leaving the BoE to meet them free from political interference. However, Bailey is concerned the latter part of the balance of power might be eroded on monetary policy and financial regulation.
