{"id":33311,"date":"2025-12-12T14:19:09","date_gmt":"2025-12-12T14:19:09","guid":{"rendered":"https:\/\/www.thebusinessdesk.com\/south-west\/news\/33311-do-no-more-than-is-necessary-to-achieve-the-right-level-of-stability\/"},"modified":"2025-12-15T07:23:15","modified_gmt":"2025-12-15T07:23:15","slug":"do-no-more-than-is-necessary-to-achieve-the-right-level-of-stability","status":"publish","type":"post","link":"https:\/\/www.thebusinessdesk.com\/south-west\/news\/33311-do-no-more-than-is-necessary-to-achieve-the-right-level-of-stability","title":{"rendered":"‘Do no more than is necessary to achieve the right level of stability’"},"content":{"rendered":"

Bank of England deputy governor Sam Woods has acknowledged that business funding is operating “like two quite different markets” for small and large companies.<\/p>\n

Woods leads the Prudential Regulation Authority (PRA) which has had a competitiveness and growth objective since 2023, in addition to its financial stability mission.<\/p>\n

\u201cThere is an interesting picture emerging about the availability of finance to companies. The picture, which I think is consistent with the macro picture that we have, is of actually very competitive financing for larger and established companies, but some more difficulties for SMEs. It seems like two quite different markets.\u201d<\/p>\n

Woods was speaking to TheBusinessDesk.com as part of a second day of visits in Manchester meeting fintechs and regulated businesses in the regions.<\/p>\n

“Of course, that’s always true to some extent, but it came across particularly forcefully in the meetings with firms today,” he added.<\/p>\n

The UK’s financial regulators, the PRA and the Financial Conduct Authority (FCA), recently launched a Scale-up Unit to support fast-growing firms to navigate the regulatory landscape.<\/p>\n

The unit will provide growing financial sector regulated firms with support and guidance to help them test ideas.<\/p>\n

“We have actually been quite successful in encouraging new entrants, both into the banking sector and the insurance sector, here in the UK. The PRA has authorised 43 new banks during its 12-year life, which is actually quite a lot in the economy the size of ours, and some of those have scaled up quite effectively.<\/p>\n

“But it’s still the case that large incumbents have much of the market. We are looking at is there more we can do to provide a helping or a guiding hand to fintechs as they expand and grow in our markets.”<\/p>\n

\"\"

The Bank of England deputy governor Sam Woods talked to students when on a visit to Manchester<\/p><\/div>\n

Woods will leave the PRA next June, at the end of his second five-year term, and he is keen to see the PRA “continue the momentum” that he believes has been built up behind its newer competitiveness and growth role.<\/p>\n

He highlighted cuts to reporting by insurers, which was reduced by one-third, and its Future Banking Data programme will has just confirmed it will delete 37 banking reporting templates as it aims to deliver tangible cost reduction.<\/p>\n

Changes to rules on credit unions – “to make it easier for credit unions to clump together to set up service organisations”, said Woods – are expected to come through in the first quarter of next year and is something that Woods “would like to get done” in his final months.<\/p>\n

He is not particularly focused on the work of his as-yet-unnamed successor, and said it was “quite unlikely” that they would seek his advice or guidance.<\/p>\n

“But if that was to occur,” he said, “I think what I would say is that our regulation does a very important job, because it preserves the stability at the core of the financial system, and when that goes haywire, the costs of that are really extraordinarily large. We think the average cost of a financial crisis is about half of GDP.<\/p>\n

“On the other hand, we should be very careful to do no more than is necessary to achieve the right level of stability, and we should also make sure we keep delivering on our new competitiveness and growth mandate.<\/p>\n

“But, secondly, because being seen to deliver on that part of our mandate is an important way of preserving financial stability. If people think we’re not doing that, the support for the other things we need to do which are less popular, like setting capital requirements for banks and things of that kind, might have less support.”<\/p>\n

But he then reiterated that this advice will probably not be sought.<\/p>\n

“I think it’s very unlikely that my successor will ask me that question. They’ll probably just ask me to shove off.”<\/p>\n

He was coy when asked about his own plans for after June.<\/p>\n

“Well, I don’t know,” he said. “If you hear of any fantastically highly paid, very interesting and very high status jobs around, let me know.”<\/p>\n

What about Governor of the Bank of England, when Andrew Bailey’s term ends in 2028?<\/p>\n

He laughed, realised he’d created his own trap, and diplomatically said: “I’ve got my head down, focused on my current job.”<\/p>\n

\"\"<\/p>\n

That job is overseeing the trade-offs between financial stability and competitiveness and growth.<\/p>\n

Woods pointed to the “enormous expansion of regulation” in the aftermath of the global financial crisis that has now been in place for a number of years.<\/p>\n

He said: “Are there bits of that that we don’t need to deliver the stability? There are various things.”<\/p>\n

In October the PRA announced significant changes to bonuses for senior bankers.<\/p>\n

However Woods said that “we never want to go to back” to a situation when risk-takers could get all of their bonus at the end of the year, creating an incentive structure which didn’t share the risk.<\/p>\n

“But our reaction to that has been to defer bonuses over a period of eight years, and that is out of line with what’s happening almost everywhere else in the world,” he said.<\/p>\n

“We looked at the data about how long it takes for problems to emerge, and we decided it’s also over cooked in that respect.”<\/p>\n

The changes cut the time senior bankers must wait before receiving their full amount of bonus from eight to four years, with part-payment able to happen from year one, rather than year three.<\/p>\n

Separately, the Bank’s Financial Policy Committee released an assessment earlier this month on capital requirements for banks. It lowered the appropriate benchmark level for system-wide Tier 1 capital requirements of risk-weighted assets by one percentage point to around 13%.<\/p>\n

It said this change would mean “banks should have greater certainty and confidence in using their capital resources to lend to UK households and businesses”.<\/p>\n

For the first time it published a side-by-side comparison of capital requirements for banks in the UK, EU and USA.<\/p>\n

Woods said: “What you see if you do that is that in most, but not in all, versions of that, America is a bit tougher than the UK and the EU.<\/p>\n

“You can see this very clearly in one of the charts that we published – the one that shows the leverage requirements for big banks – that America is coming down, but I think it is just going to come down and be in line with the rest of us, and I think that will be fine.<\/p>\n

“What we absolutely want to avoid, and I think our colleagues around the world want to avoid, is a race to the bottom.”<\/p>\n

\"\"

(Credit: Financial Stability in Focus report, December 2025)<\/p><\/div>\n

 <\/p>\n

A challenge for Woods and his teams is demonstrating that what they are doing positively feeds through into the real economy.<\/p>\n

“The truthful answer is we can demonstrate it better for some areas and for others,” he said.<\/p>\n

“If you go back to the bankers’ bonus example, I think that’s highly relevant to competitiveness, because it’s very relevant to where big foreign banks decide to locate their bankers.<\/p>\n

“And, while I’m not sure it’s so much a real economy thing, but if you go to bank capital requirements, we have thought very carefully about where do we calibrate them.<\/p>\n

“There’s a trade off between managing the risk of future financial crises, which are very bad for growth, and having a lower speed limit on the economy today in order to gain that safety.<\/p>\n

“We basically trade those two things off, and the effects of that translates through to the economy actually quite rapidly.”<\/p>\n","protected":false},"excerpt":{"rendered":"

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