In the City we trust – the fine line between regulation and growth

Maximilian Bierbaum, head of research at New Financial, joined a panel with David Bailey, executive director, PRA, Rachel Blake MP, Cities of London and Westminster & Treasury Select Committee, David Pinto-Duschinsky MP, chair, Financial Markets and Services APPG, Simon Walls, interim executive director, Financial Conduct Authority, moderated by, Fiona Maxwell, financial services UK editor, POLITICO Europe. The panel enjoyed a wide-ranging discussion and a nuanced debate which moved well past traditional binary arguments around the risks and rewards of regulation, reform and deregulation.

The event touched on key themes highlighted in New Financial’s report: ‘A focus on market outcomes: evaluating the UK regulatory framework’ which provided a 10-year performance review of UK regulators and argued that the sensible reduction in risk in the wake of the financial crisis has gone too far and morphed into a culture of risk aversion that has spilled over into the wider economy in the form of lower investment, innovation, and growth.

While ‘more risk’ can be a scary concept for many people (including regulators and politicians), it is a natural corollary of more investment, dynamism, and innovation. The paradox is that in seeking to reduce risk, we have created bigger long-term risks elsewhere over the last 15 years. Too much risk aversion in the name of protecting individuals undermines the very tools that we need to ensure their long-term prosperity. Enabling investors and market participants to take a little more risk could help create a virtuous circle of investment and growth. 

The key challenges now are i) to reform the framework without putting resilience at risk and ii) to acknowledge the limits of what regulatory reform can achieve on its own, and to see where we need wider reforms in other areas that are important ingredients for competitiveness and growth such as tax, planning, access to talent and migration, education, and digitisation that are all beyond the remit of regulators. You can watch highlights from Max’s panel remarks via the video below.

If you are interested in learning more about New Financial’s ‘A focus on market outcomes’ report or to hear about our upcoming events programme, please do get in touch via: info@newfinancial.org

You can watch a full video of the event here.