Source: AdobeStock / Mary
The new minister for the City of London has called on regulators to adopt a more accommodating approach towards risk-taking in a bid to revitalize the UK’s stagnating economy.
Bim Afolami, who recently assumed his position as part of a ministerial reshuffle, emphasized the need for regulators to strike a balance between effective oversight and allowing room for innovation and growth.
Speaking at the Financial Times Global Banking Summit, Afolami highlighted the futility of creating overly cautious regulatory environments.
“There’s no point having the safest graveyard. Animal spirits need to be there, we need to innovate, we need to drive growth and initiative,” he said.
Risk is Integral to Growth and Innovation
Recognizing the inherent conflict between politicians and regulators, Afolami acknowledged that while politicians must avoid short-term thinking, regulators should not seek to eliminate all risks.
He emphasized that risk, when appropriately supervised, is integral to the growth and innovation of any sector of the economy.
The UK government has been pushing for a shift in regulatory approach, aiming to promote growth and competitiveness.
Regulators in the financial, competition, and accounting sectors have been instructed to prioritize these goals.
Additionally, energy, water, and communications regulators are set to receive new mandates that encourage “growth.”
Afolami, a former Freshfields lawyer and HSBC banker, highlighted the importance of making regulators more effective rather than merely reducing regulations.
He noted that excessive reporting requirements and complex structures can hinder accountability in practice.
David Bailey, who oversees UK bank supervision at the Bank of England, supported Afolami’s approach, emphasizing the need to balance facilitating risk-taking with effective regulation.
Bailey pointed out that the BoE’s mandate includes promoting safety and soundness as a primary objective, alongside fostering competition and competitiveness.
While some regulators have cautioned against an excessive focus on competitiveness, Afolami’s priorities as City minister include implementing previously announced capital market reforms, improving regulatory structures, and promoting wider ownership of companies by ordinary individuals.
He expressed a desire to encourage young people to feel a greater stake in society by exploring measures to enable broader public participation in company ownership.
Afolami Voice Support for Crypto Companies
Afolami also voiced support for cryptocurrency businesses operating in the UK, despite concerns raised by industry experts about fraud risks.
He emphasized the importance of not tar-painting all crypto businesses with the same brush, expressing confidence in the government’s plan to regulate the sector.
Furthermore, Afolami backed the recent decision by financial regulators to lift the cap on bankers’ bonuses, highlighting his intention not to introduce measures to monitor pay within the sector.
“It’s really important that we don’t tar every crypto business as being like FTX or Binance.”
The UK government has been actively addressing policies related to artificial intelligence, financial technology, and the metaverse through regulatory measures, enforcement actions, and investigations.
Back in October, the Financial Conduct Authority (FCA) implemented some new rules pertaining to digital assets, which require crypto firms to register with the financial regulator and have their marketing materials approved by an FCA-authorized firm.
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