Bank of England pushes back against broad deregulation calls

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Bank of England on regulation

Highlights

Bank of England Governor Andrew Bailey rejects broad deregulation calls, advocating for targeted regulatory adjustments to support financial stability and economic growth.
The Bank has recently eased capital requirements related to leverage rules, seeking to balance deposit safety with banks' ability to lend profitably after challenges in the 2010s.
Bailey urges stronger international coordination, especially with the U.S., on testing and regulating advanced AI models to mitigate cross-border financial stability risks.

Bailey sets out case for targeted rule changes

As reported by Reuters, Bailey tells the annual Mansion House dinner in London's City financial district that calls for sweeping deregulation are too simplistic and that the focus should stay on rules that work effectively for growth and stability.

In a speech text released in advance by the Bank of England, he says arguing simply for less regulation is "unhelpfully reductive." He adds that not every rule on the central bank's books is perfectly formed, but says adjustments should be made carefully rather than through a broad rollback.

Bailey points to recent moves by the Bank of England to ease some requirements on how much capital banks must hold to meet leverage rules, after a related relaxation in December. He says such changes require balancing the safety of deposits with the need for banks to remain profitable enough to lend to the wider economy, an area where they struggled in the 2010s.

Speech also highlights economic and AI policy risks

Bailey says Britain is operating in a fairly soft economic setting in terms of activity. Earlier on Tuesday, he tells a parliamentary committee that renewed conflict between the U.S. and Iran is so far having a limited effect on inflation.

He also uses the speech to renew calls for the U.S. to take a more cooperative approach to managing risks from advanced artificial intelligence models. As chair of the Financial Stability Board, Bailey says testing of frontier AI models needs much stronger international coordination before those systems are put into wide circulation, arguing that no country can isolate itself from cross-border technological risks.

The remarks come before Chancellor Rachel Reeves delivers what may be her final major speech as finance minister at the same event. Earlier on Tuesday, government banking adviser and Starling Bank Chief Information Officer Harriet Rees says British banks' inability to access Anthropic's Mythos AI model underlines the urgency of building domestic AI capabilities.

In our earlier article on UK banks’ limited access to Anthropic’s Mythos AI model, we explained why the restriction is being treated as a wake-up call for building more domestic AI infrastructure, skills, and supplier diversity. We also outlined policy proposals urging closer regulatory oversight of major AI providers by potentially designating them as critical technology suppliers to the finance sector, to reduce concentration and operational resilience risks.

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