Time to loosen rules on banking, says Reeves

Rachel Reeves told bankers attending her Mansion House speech yesterday that regulations put in place to protect the economy after the global financial crisis had "gone too far".

- Heather Stewart Economics editor

Speaking at the glitzy annual gathering in the Square Mile yesterday, the chancellor called the financial services sector the "crown jewel" of the UK economy. She said tighter rules on banks and investment institutions after the 2007-8 crash had created "a system which sought to eliminate risk-taking".

Reeves added: "While it was right that successive governments made regulatory changes after the global financial crisis, to ensure that regulation kept pace with the global economy of the time, it is important that we learn the lessons of the past.

"These changes have resulted in a system which sought to eliminate risk-taking. That has gone too far and, in places, it has had unintended consequences which we must now address." The last Labour government had encouraged the City regulator to take a "light touch" approach to regulating the financial services sector, but was then forced to step in and bail out a string of banks when the US subprime mortgage crisis prompted a catastrophic chain reaction.

At the time, regulators were accused of failing to rein in the risky behaviours that had led to the crisis, which plunged the UK into recession.

But Reeves suggested she now believed it was time to loosen some of the constraints that were subsequently imposed on the sector.

"We cannot take the UK's status as a global financial centre for granted.