Bank of England braces for new clash with Truss over EU banking rules

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The European Union is set to relax its own Basel rules and diverge on some key areas, meaning UK banks could be forced to implement tougher standards than their rivals on the continent.

UK Finance, the main banking lobby group, has expressed concerns about the design of the latest Basel package.

The impending clash comes as Ms Truss and Mr Kwarteng attempt to unleash a ‘Big Bang 2’ in the City of London in a bid to make the UK’s financial services sector more internationally competitive.

This week, in one of his first acts as chancellor, Mr Kwarteng told city bosses he would pursue sweeping financial reforms to unleash growth, in a direct echo of Margaret’s deregulation of the Square Mile Thatcher in the mid-1980s.

Leaders are already pushing for the changes they would like to see. Ms Truss has come under pressure to force regulators to make improving competitiveness their primary objective.

At a meeting with City bosses last month, industry chiefs urged Ms Truss to make promoting global competitiveness a “primary objective” of the FCA and PRA, sources say. as London feared falling behind rival centres.

Such a move would go further than the Financial Services and Markets Bill currently before Parliament, which proposes making the promotion of competitiveness a secondary objective of regulators.

Currently, the main mission of city regulators is to ensure that markets and financial systems are “sound, stable and resilient”.

During the Tory leadership election, Ms Truss reportedly considered a possible merger of the PRA and the Financial Conduct Authority (FCA) in a bid to put growth and competitiveness at the heart of post-Brexit regulation.

The increased emphasis on cutting red tape and boosting competitiveness is likely to further heighten tensions between the government and city regulators.

Ministers and Andrew Bailey, the Governor of the Bank of England, have clashed over who is to blame for the cost of living crisis as inflation spins out of control.

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