sam-woods-deputy-governor-of-the-bank-of-england-head-of-prudential-regulation-authority-pra-1
9 March 2022Insurance

UK could face dangerous trade-offs in oversight if competitiveness reigned supreme, warns PRA chief

The UK could do its insurance industry more harm than good by placing support for competitiveness on an equal footing with prudential concerns when guiding its industry regulators, the chief of the Prudential Regulation Authority (PRA) has claimed.

Responding to industry calls for competitiveness to be enshrined as a ‘primary objective’ for regulators, Bank of England deputy governor and PRA chief Sam Woods (pictured) told the House of Lords committee that such a move would be a “mistake’ by creating inevitable trade-offs between competitiveness and prudential security.

“I do not think it makes sense to trade off competitiveness issues against safety and soundness and policy holder protection,” Woods said.

“I think it is a bad idea from a financial stability point of view, but I also think it is bad for competitiveness itself,” Woods said.

Some firms bringing capital to London on account of a “clear and fair” regulatory regime could eventually shy away. And the UK’s standing and influence in global regulatory bodies like IAIS and Basel, important cogs in the “upstream rule-making process,” would be “definitely diminished”.

But placing competitiveness into a secondary objective “could work well,” but with devils still lurking in the details. Promoting the industry outright sounds overly aggressive versus promoting the economy and the conditions in which the industry works, he offered by way of illustration.

Any other adjustment of the regulation regime ought not be revolutionary just for the sake of revolution, Woods warned. The UK had a strong voice in crafting the recently inherited EU acquis and changes should be piecemeal, a form of “picking up rocks, if you will.”

“On the London Market side, the market seems less keen to make changes,” Woods said. The current regime may be less troublesome than any notable change. Major global players in London may still be hoping the EU will consider equivalence to ease cross-border business.

On the supervision side, Woods defends the PRA and its current level of demands on insurers. “To me it seems appropriate,” Woods said of levels of interaction. His office is calibrated to meet his rough-and-ready policy target of “a low-cost lack of messy failures.”

“Parliament has given us the statutory objective to look into the safety and soundness of these firms …. there is a certain minimum below which, if you go there, you are not doing your job,” he said. The market’s smallest firms, however, could merit a less proactive approach, he suggested.

PRA staffing coverage for London Market names is notably lower than for major banks or even other insurance segments. “I think we are quite lean,” Woods said of the regulator staffing per regulated entity.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.

Already registered?

Login to your account

To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.

Two Weeks Free Trial

For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Elliot Field at efield@newtonmedia.co.uk or Adrian Tapping at atapping@newtonmedia.co.uk


More on this story

Insurance
8 March 2022   The aim is to completely cut off the Russian financial system; collateral damage believed to be ‘manageable’.
Insurance
2 December 2021   The company has also secured approval to write reinsurance business in the US from January 1.
Insurance
25 April 2022   New money chiefly covers new strategic tasks; underlying supervisory budget up 3%.