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Archbishop Welby calls for tough, agile rules for financiers

12 January 2023

‘We need competition and an effective industry, but not a race to the bottom’

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BANKS have “heavy social obligations”, and the culture of the financial-services industry should reflect this, the Archbishop of Canterbury told the House of Lords on Wednesday.

Both Archbishop Welby and the Bishop of St Albans, Dr Alan Smith, spoke in the debate on the Financial Services and Markets Bill, which seeks to facilitate economic growth by amending some of the regulations for the industry.

Archbishop Welby said: “We need a system that is agile and keeps regulation light, so that the industry is competitive, but keeps principles tough and flexible, with heavy consequences for breaking them.

“We need competition and an effective industry, but not a race to the bottom. There needs to be a race to the top, to the best-quality services, which serve people and the common good both now and in future generations through its green aspects.

“There has been a tendency over the years to say how much the City contributes, but let us be clear that, if we take into account the roughly £250 billion pumped into the banking system in 2008, it is not so obvious that the City is in credit to the taxpayer — it may well be that it is in significant debit.”

Archbishop Welby said that the financial-services sector received an “effective subsidy” worth approximately £30 billion a year as a result of the “implicit government guarantee” that it would not be allowed to fail.

“If there is £30 billion a year going spare, many other industries and not a few churches would welcome that very warmly,” he said, arguing that the culture of the financial-services industry needed to reflect the debt that it owed to society.
“Is the mind-set and approach of key leaders in the industry one of casino banking, or banking for the common good? That is essentially a moral question,” he said.

He concluded that, overall, the Bill was “very positive”, and that “as long as it ends up reminding financial services that they are services for all, and has principles at its heart, it will be welcomed and make a significant difference”.

Dr Smith said that Jesus had much to say about attitudes to money, “as its use reveals our values as individuals and as a society, often in a very stark way”.

He praised provisions in the Bill to regulate crypto-currencies and to encourage credit unions. “The Church of England has been involved in a very large project using the insights of credit unions in our secondary schools to teach financial literacy, and to teach young people how to handle cash and their money and how to plan responsibly. We need to build on this work urgently.”

Dr Smith also welcomed the Bill’s emphasis on levelling up, but asked whether the Financial Conduct Authority would be under the same obligation as other government departments to “rural-proof” new regulations, to ensure that cash remained easily available (the world of contactless payment being an “undiscovered country” for many, according to the Conservative peer Lord Hunt of Wirral).

Dr Smith and several peers asked why the Bill required the financial-services industry only to “have regard” to net-zero targets, instead of making them a primary objective alongside economic growth.

Dr Smith said that a statuary objective to “protect and restore nature and deliver a net-zero economy” was necessary to fulfil the commitments made at COP 26.

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