LONDON, Oct 12 (Reuters) - Financial regulators should be wary of rolling back rules put in place after the 2007-09 global financial crisis in the name of boosting economic dynamism, the Bank of England’s chief economist, Andy Haldane, warned on Thursday.
Haldane told a conference hosted by the Peterson Institute for International Economics in Washington that new rules still needed to be fine-tuned, but that should not be used as an excuse to dilute them.
“To follow this course unthinkingly would risk repeating regulatory mistakes from the past, recent and distant. Only 10 years on from the biggest crisis in several generations, there are already some eerie echoes of those siren voices,” he said in a text provided by the BoE.
U.S. President Donald Trump’s administration is seeking to reverse some post-crisis restrictions on American banks’ investment activities.
The BoE has said previously there may be good reasons to change some domestically-focused U.S. rules, but that it is important that regulation of major internationally operating banks remains consistent with global norms.
Since the financial crisis, the BoE has received the widest powers of any major central bank over financial regulation. In recent years has restricted some mortgage lending and last month sought to ensure banks set enough reserves aside in case fast-rising consumer lending sours.
Haldane said there was “unfinished business” around how central banks explained potentially politically charged decisions over lending rules.
“There is a debate to be had ... about the appropriate degree of discretion to confer on regulators, to ensure they retain the flexibility they need to respond to events while ensuring their decisions are clear, transparent and unpolluted by behavioural biases and time-inconsistency problems,” he said.
“There are also interesting issues to explore about how regulators explain and account for their decisions to wider society, particularly when they have strongly distributional consequences,” Haldane added.
Haldane did not discuss Britain’s economic outlook or BoE monetary policy in the paper.
Reporting by David Milliken; Editing by Toby Chopra