Governor says cutting red tape alone will not deliver growth, but signals openness to simplifying rules as debate over City regulation intensifies.
Bank of England Governor Andrew Bailey has pushed back against calls for sweeping deregulation of Britain’s financial sector, arguing that robust oversight remains essential to economic growth even as policymakers consider ways to simplify the rulebook.
Speaking to City leaders at the Mansion House, Bailey rejected the notion that reducing regulation is the answer to Britain’s sluggish economy, warning that the debate has become “unhelpfully reductive.”
His intervention comes amid growing political pressure to ease post-financial crisis banking rules, with critics arguing that excessive regulation is constraining lending, investment and long-term growth.
Bailey defended the UK’s capital requirements, which require banks to hold sufficient reserves to absorb losses and protect depositors during periods of financial stress.
The framework, introduced following the 2008 global financial crisis, has strengthened the resilience of Britain’s banking system but has also been criticised for limiting lending capacity.
The Governor stressed that regulators should not seek to limit commercial returns.
“There should not, to be clear, be a cap on returns set by regulators,” Bailey said.
Instead, he argued that effective competition—not regulatory intervention—should prevent excessive profits by lowering barriers to market entry and encouraging greater competition across the banking sector.
While defending the overall regulatory framework, Bailey acknowledged that no system is perfect and signalled the Bank is prepared to review existing rules.
We are very much open to simplifying and adjusting regulations where needed,” he said.
However, he cautioned that any reforms must preserve financial stability, describing a resilient banking system as a prerequisite for sustainable economic growth.
The comments suggest the Bank is pursuing targeted regulatory reform rather than wholesale deregulation.
The debate over financial regulation has intensified in recent months.
Conservative leader Kemi Badenoch has argued that post-crisis regulation has created an overly risk-averse financial sector and proposed easing capital requirements to unlock an estimated £450 billion for investment across the UK economy.
Supporters believe reducing regulatory burdens could stimulate lending and improve productivity, while critics warn that weakening safeguards could increase systemic financial risks.
Bailey’s speech underlines the balancing act facing UK policymakers.
With economic growth remaining subdued and investment lagging behind international peers, pressure is mounting to improve the competitiveness of the City of London.
Yet the Bank of England continues to argue that financial stability should not be sacrificed in pursuit of faster growth.
The challenge for regulators will be determining where rules can be streamlined without undermining the resilience that has become the cornerstone of Britain’s post-2008 financial system—a debate that is likely to remain central to economic policy in the months ahead.
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