Bank of England chief cautions over cutting regulation post-financial crisis

The Governor of the Bank of England has cautioned against unravelling regulation introduced after the global financial crisis amid Government-led efforts to cut red tape.

Andrew Bailey insisted there was “no trade-off between economic growth and financial stability” in a speech delivered in London on Tuesday.

Speaking at the University of Chicago Booth School of Business, he said there was a “reaction taking place against regulation, and the responses to the GFC (global financial crisis).”

“We must not forget the lasting damage done by the GFC. There is no trade-off between economic growth and financial stability.”

The comments come weeks after the Prime Minister vowed to “clear out the regulatory weeds” to spur on economic growth.

Sir Keir Starmer criticised the “morass of regulation that effectively bans billions of pounds” of investment in the UK, describing “thickets of red tape” that he said have spread through the economy.

Government plans to cut red tape in the financial sector have included sending “growth-focused remit letters” to regulators and urging them to “tear down regulatory barriers”.

Mr Bailey said the last 15 years had seen the “emergence of risks to financial stability originating in the non-bank system”, incorporating any financial institution that is not a bank.

These businesses must “manage the risks they face, and in some parts of the system it is appropriate that regulations are in place to provide more assurance of this management taking place”, the Bank chief said.

Nonetheless, he said there were typically choices for the country about how it deals with potential vulnerabilities in the system.

“It is critical that we have and develop tools of assessment and intervention. But these interventions may not always need to be more regulation,” he said.