In a move that feels more like a plot twist from a satire than serious governance, the UK’s financial watchdogs, once proud defenders of market integrity, have now seemingly transformed into little more than the industry's obedient puppies. Yes, you read that right—those trusted guardians of our financial stability have been reduced to wagging their tails at the whims of the very institutions they’re supposed to keep in check. All thanks to some clever maneuvering by our ever-astute Treasury.
Labour peer and accountant Lord Sikka didn’t mince his words when he addressed this travesty in the House of Lords. He delivered a stinging rebuke to the previous government for reinstating a competitiveness and growth objective into the remit of financial regulators. In case you missed it, that’s code for: "Let the financial sector run wild, we’ve got GDP to worry about!"
After the 2007-08 financial crisis—a delightful little debacle caused by the very recklessness these regulators were supposed to prevent—one might think that regulators would be given sharper teeth. And indeed, for a brief moment, they were. Their primary duty became, as Lord Sikka puts it, to act as “watchdogs and guide dogs.” But, in a twist that would make even the most cynical observer raise an eyebrow, this was all undone by the last government. Because who needs strict oversight when you can have a booming financial sector, right?
Now, with the regulators back on a leash, any stringent oversight or attempts to lower gearing ratios (that’s the amount of debt compared to equity, for those who don’t speak fluent financial jargon) are seen not as essential safety measures, but as an outright attack on the competitiveness and growth of the industry. One might say, rather sardonically, that the industry has never had it so good. The puppies, after all, are only too happy to please.
The timing of this all is, of course, impeccable. Just as the Government is pushing a new Bank Resolution (Recapitalisation) Bill to give the Bank of England more tools to manage the collapse of smaller banks, we’re also being reminded of the shaky foundations these regulations now rest upon. The Bill itself, while aiming to protect taxpayers from footing the bill for future banking disasters, seems almost like a plaster on a bullet wound—admirable in intention, but missing the mark on addressing the root of the problem.
As Lord Sikka aptly noted, these regulatory conflicts were contributory factors to the 2007-08 crash. But who needs to learn from history when we can just repeat it? And let’s be clear, it’s not just about the small banks that might collapse—it’s about the entire system, teetering on regulations that have been diluted in the name of competitiveness.
And what about the regulator’s remuneration, you ask? Oh, that’s just another delightful detail. You see, they’re funded by fees from market participants—yes, the very entities they’re supposed to regulate. It’s a bit like asking the fox to pay for the privilege of guarding the henhouse. So, naturally, anything that might upset these market participants is, well, off the table.
In summary, what we have here is a regulatory framework that’s been systematically weakened to ensure that the financial sector can continue to rake in profits with minimal interference. All under the guise of promoting competitiveness and growth, of course. The watchdogs have turned into lapdogs, and it’s the consumers—those pesky little people at the bottom of the pyramid—who will inevitably pay the price when things go wrong.
So, here’s to the new age of financial regulation in the UK—where the guardians of stability are more concerned with keeping their industry friends happy than with actually preventing the next financial crisis. Cheers!
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