My Lords, Ladies and Gentlemen.

Good evening and welcome to the UK Finance annual dinner. It is a real pleasure to see so many of you here in this great venue. I look forward each year to this dinner, as it is a time to say thank you to our members. I should also say a big thank you to EY who are sponsoring tonight’s dinner once again.

We have just over three hundred members and, whilst there is great diversity in their business models, there is a common thread that binds them together. They all help the country to thrive, to grow, and to prosper. UK Finance members fund infrastructure investment like wind and solar. They create the markets that allow investment to drive growth, and people to save for retirement. They help small businesses start up and grow, and enable families to buy their own homes. Our members make billions of payments each year, allowing the smooth running of the economy. And we fight crime – right at the front line in a way that no other industry does. The industry employs over one million people in high quality, high productivity, jobs all over the UK and it contributes nine per cent of the country’s economic output. 

This massive contribution to the economy is only possible because the UK banking and finance sector is so much more than a domestic market. The UK is a melting pot where firms from around the world can employ capital and earn returns. We are world class in so many disciplines with deep pools of liquidity and talent. The industry innovates and, often, leads the world but we cannot take this for granted. We face intense competition from other centres in Europe, the US, and the Middle East. 

The new government has recognised the importance of banking and finance and the part we play in the economic well-being of the country. UK Finance worked closely with Tulip and her colleagues in opposition to help craft Labour’s approach to the sector, and we are continuing that strong relationship now the party is in power. 

In all my engagements with the new government, as well as thanking them for their support, I put forward ideas for how we collectively can drive greater growth and inclusion.  I have described how, since the global financial crisis, we have seen a consistent move to minimise, or even eradicate risk for consumers and SMEs. This move has taken many forms and involved many regulatory or quasi regulatory bodies. They all, in their own way, have sought to do good things for customers. I am delighted to say that Tulip and her colleagues in the government really listened to the argument. And, in her excellent Mansion House speech, the Chancellor outlined many very welcome steps, which I think will make a significant difference to growth and inclusion. 

We recently considered in detail, the regulatory burden on the industry. We identified some 16 bodies that had either direct regulatory oversight, or a large influence on the sector. Many of the regulations are unique to the UK and this is an issue for investors. This in turn can lead them to be reticent about investing in UK banking and finance.

Some of these regulatory activities overlap and can be at odds with one another. I have made the point to government and regulators for several years that the sum of all these disparate parts is causing risk aversion and, ultimately, restricting choice and product availability for customers.  As I mentioned at last year’s annual dinner the attempt to eradicate risk is resulting in the emergence of a different set of risks such as lower growth and less financial inclusion.

It is too easy to solely blame regulators for this. The move we have seen over the last fifteen years is down to the whole ecosystem. I gave evidence to the House of Lords Financial Services Regulation Committee recently and I refused to single out regulators for criticism. I welcome the focus of the remit letters shifting to be pro-growth.

There is evidence that the FCA and PRA in particular are really starting to embrace their secondary competitiveness and growth objective.  UK Finance worked tirelessly to advocate for the listing rules changes which the FCA brought in recently. This achieves a sensible balance between investor protection and entrepreneurial support. 

And the PRA listened and adopted nine out of UK finance’s top ten recommendations when it came to Basel 3.1.  It has further developed its simple domestic deposit takers regime for the smallest firms and, has committed to developing its nascent intermediate regime for mid-tier businesses, acknowledging our shared concern to level the playing field.

I have long wondered about the Consumer Duty and its implementation. On the face of it a good outcome for customers is something we should all strive for. The problem I see is that a good outcome could be viewed through different lenses at different times. I worry about fluctuations in interest rates and changes in customers circumstances. I hope that the ombudsman service will take a balanced view and avoid using hindsight. I recommended that the FCA should set up a working group with industry, to consider the Consumer Duty, in the light of the secondary competitiveness and growth objective. It should seek to help stimulate growth and avoid exacerbating financial exclusion.

We have already seen product withdrawal and risk appetites diminish as a result of the Consumer Duty. There is a real risk that once again well-meaning legislation will result in greater theoretical protection and, as a consequence, less choice and self-determination for customers.

The ombudsman service plays a valuable role for many consumers and firms, by allowing them to have their complaints independently adjudicated. When making decisions, it does so based upon what it considers “fair and reasonable”. This can be problematic as decisions have the potential to cut across both regulation and legislation. It can, and has, set precedents and I suggested that a review of the way the ombudsman service operates should take place using the DISP rules. I was delighted that the Chancellor agreed and that this will happen soon. 

More broadly, the recent court of appeal judgement on motor finance has highlighted that firms cannot reply on regulatory conformance alone, when considering their duties to customers. Gaps between the law and regulation must be closed, so that both firms and customers can be clear about their rights and responsibilities.

Fraud is a scourge on society. It damages lives way beyond any financial loss, and the money goes directly into the pockets of organised criminals fuelling other forms of serious crime. The industry is at the forefront of efforts to tackle this pernicious problem. We worked closely with the PSR in the run up to 7 October and I was pleased that they aligned the maximum reimbursement sum with the FSCS limit. It still covers well over 99 per cent of cases. I was delighted that UK Finance, supported by our larger members, could pull out all the stops and deliver a working system ready for the start date of mandatory reimbursement. Beginning a project like that in April, for delivery in September, on a system we had written off, was quite a feat. The team did a brilliant job.

But dealing with reimbursement rules is really just administration. It does nothing to actually stem the flow of money into the criminal’s pockets. We need the wider system to help more. I call on all tech and telcos to do more and to help financially. Again, here the Chancellor has taken steps to demand greater participation from tech and telco firms which I really welcome. I do not wish to tar all tech companies with the same brush. Some are working very hard to use their immense power and data for good. There is, however, one very large firm that is the source of the majority of fraud cases and they could, and should, really put their shoulder to the wheel and help far more than they do.

Another point I made to the government was around payments. So, I was pleased to see the National Payments Vision announced last week. Payments are the lifeblood of the financial systems. We used to lead the world, but we have mired ourselves in cost and bureaucracy, and fallen behind our key competitors. With the new payment architecture now stopped we need a solution that relies less on a centrally driven taxation based model. It has proved not to work. We need a much more commercial model where capital can be risked, returns made and innovation encouraged. I was delighted that NPV recognised this need. Tulip, Gwyneth, thank you for listening and acting.

The NPV, and the exciting work on the Regulatory Liability Network, fills me with hope that we can regain our lead once again.

I suggested that we should tackle open banking in the same way and, again, the government listened and acted. Open banking developed a life of its own with limited benefit and a huge bill, taxed on an arbitrary group of banks.  Those banks are, in effect, funding the free consumption of APIs by tech giants, who then use the data to drive market advantage. We cannot let this continue. I am hopeful that with clear regulatory oversight from the FCA, we can drive a sensible commercial path forward.

So, why does all this matter?  It matters because it has a real impact on real people.  Regulatory confusion and sclerosis has held us back and, it is like a breath of fresh air to see the new government seeking to address so swiftly after taking office. Thank you Tulip.

The compound risk aversion we have seen, and which the Lords Committee seemed surprised existed, has a real-world impact. Research suggests there are far fewer mortgages now than there would have been under the rules in place a decade ago. There is definitely a case for reviewing the interest rate stress tests and, the limits on the amount of a lenders book that can be more than 4.5 times income.

The business lending market has grown in nominal terms but has not grown when inflation and GDP growth are taken into account. In the meantime, corporate insolvencies have hit levels not seen since 1993. 

We do not need some kind of kneejerk swing back to the past. What I believe is required is a move to allow the risk/protection pendulum to settle at the optimum vertical position with slightly more risk in the system and an acknowledgement that this will not mean perfect outcomes for everyone all the time. 

Seeking ultimate protection has led us down a blind alley to a place with less choice, less freedom, lower growth and more exclusion. Balance is what is needed and I sense that the FCA and PRA understand this. It is clear the government understand this too as the Chancellor referred to this subject in her Mansion House speech and I quote “These changes have resulted in a system which sought to eliminate risk taking. That has gone too far and, in places, it has had unintended consequences which we must now address.”  It is impossible to overstate the importance of this quote. 

One of the questions I was asked by the Lords Committee attempted to try and divide the UK Finance membership. I absolutely refuted the assertion that we represent only large banks. Our association is still young – it is just seven years old and, I believe, and more importantly, you tell me through our survey, that we are representing all of you effectively. My last role was in a smaller member, and I was passionate about not being drowned out as UK Finance was formed. The opposite has proved the case, as smaller firms have a larger voice. And we can represent you all even where there are differing views. That is what the team aim to do on a daily basis. We are one UK Finance!

I am delighted that we retain such loyal members. We have enjoyed 99 per cent retention of existing members and our membership has grown, as has the scope of work we undertake for you. We never take that for granted. My brilliant team – Julie, Jana, Sarah, Alastair, Eric, David, Ben and Conor, have driven all these agenda items. We and the wider UK Finance team enjoy representing this powerful, important, industry which is a force for social good.

We advocate on behalf of members but we do much, much, more than that. We work very closely with officials, ministers and regulators to improve the outcome for society as a whole. The alignment between our views, and those of the new government, is a testament to that close working relationship and the willingness of all our stakeholders to listen, weigh up the arguments and then act.

I am delighted to say that I had to rewrite this speech significantly in the light of the Mansion House announcements as most of what I was going to recommend has been adopted. 

Our arguments are made genuinely, practically, and privately. And that is why we succeed on your behalf. Thank you so much for your support. Enjoy the evening.