UK Argues Post-Crisis Crackdown on Wall Street Has Gone Too Far

In the wake of the 2008 financial crisis, regulators worldwide implemented stringent measures to prevent another collapse. However, a decade and a half later, the UK government is arguing that the post-crisis crackdown on Wall Street has gone too far, hindering growth and competitiveness in the financial sector.

Chancellor Rachel Reeves, in her recent Mansion House speech, criticized the current regulatory framework for focusing too much on risk and not enough on growth. She proposed a series of reforms to rebalance regulations, aiming to promote growth while maintaining market stability. Reeves plans to announce "growth-focused remits" for financial regulators and publish the first strategy for financial services growth and competitiveness next year.

The UK's post-crisis regulatory crackdown has indeed increased the cost structure of UK banks. According to Saxo UK's CEO Andrew Bresler, the regulatory burden has led to a 30-40% increase in personnel to meet requirements, highlighting significant costs. This has raised concerns about the competitiveness of UK banks, with some City insiders believing the push to regulate better has gone too far, stamping out healthy risk-taking and creating barriers for small businesses.

To address these concerns, the UK government is exploring reforms to the Financial Conduct Authority (FCA) to promote growth and address the increased regulatory burden. The government aims to strike a balance between protecting consumers and promoting growth in the UK's financial sector.

One of the proposed reforms is the establishment of PISCES, the world's first regulated market for trading private company shares in a tax-efficient manner, by May 2025. This move aims to boost investment in capital-starved British firms and complement plans to build "megafunds" for infrastructure projects and growth firms. Additionally, the government will launch the Transition Finance Council and publish draft legislation for tighter regulation of ESG ratings providers, boosting investor confidence in sustainable companies. Reeves also committed to consulting on economically significant companies disclosing information using future UK Sustainability Reporting Standards.



The UK's proposed reforms aim to address the growing concern over the gap in earnings between US banks and their global competitors. By promoting growth-focused regulation and reducing barriers to entry for new players, the UK can foster a more competitive financial sector and narrow the earnings gap with US banks.

In conclusion, the UK government is taking steps to rebalance post-crisis regulations, aiming to promote growth while maintaining market stability. By addressing the increased regulatory burden and encouraging innovation, the UK can foster a vibrant and competitive financial sector, narrowing the earnings gap with US banks and attracting top talent.