A deputy governor at the Bank of England has sounded the alarm on City deregulation, saying a proposed softening of the rules for finance companies would put billions of pounds of pension fund savings at risk.
Speaking out against a draft law championed by Rishi Sunak while he was chancellor, BoE deputy governor Sam Woods said the changes, which could allow insurers to reduce their cash reserves which are supposed to act as a buffer against sudden downturns, were “unbalanced”.
The UK’s life insurance industry, which specialises in managing retirement savings, directly invests about £1.3tn in savings held in an estimated 21m individual pension pots.
In a forceful intervention, Woods said: “Leaving the EU should not lead us to lower standards of financial regulation in the UK.
“Changing prudential regulations in the UK should not be simply a one-way street, particularly where that would mean weakening protections for business which serves groups such as pensioners.”
In addition to his role at the Bank, Woods is chief executive of the Prudential Regulation Authority, which polices banking and insurance companies.
Speaking at an online event on Friday, Woods said reform of insurance capital rules should not lead to weaker controls. “I worry that some might consider such a thing to be a free lunch, but in fact less capital, fewer checks and fewer restrictions on assets, with no steps to strengthen the part of the regime where that is needed, means more risk for pensioners and other policyholders.”
The Bank of England inherited regulation of rules governing the finance industry following the 2008 financial crash. It was widely recognised that the previous watchdog had allowed banks and insurers to cut their reserves, leaving them
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