A senior banking executive has warned that the red tape introduced by financial regulators following the global financial crisis has gone too far, stifling competition and innovation in the sector. Andrew Bresler, CEO of Saxo UK, believes the heavy regulatory burden placed on banks has come with significant costs, and questions whether the current rules are truly fit for purpose.
Speaking about the impact of post-crisis regulations, Bresler highlighted the sharp increase in compliance costs. “If I think about how many people I would need pre-financial crisis versus post-financial crisis, there are probably 30 to 40% more people to meet the regulatory requirements. That’s a lot more people than beforehand. It has definitely not been cost-free. There is an opportunity cost,” he said.
The added regulatory strain, according to Bresler, has made it harder for smaller businesses to compete. He pointed out that the high cost of compliance acts as a barrier to entry for new firms, further reducing competition within the financial services industry. “It creates an issue for small businesses because your entry barrier is so high,” Bresler explained.
The government’s recent consideration of reforms to the Financial Conduct Authority (FCA) has sparked debate about whether the regulatory regime is striking the right balance. Bresler, among others, feels that the measures aimed at protecting consumers have unintentionally created inefficiencies and stifled healthy risk-taking in the sector.
His comments come at a time when the London stock market is struggling, and there are calls for new initiatives to revive its fortunes. Bresler argues that reforming regulations, rather than measures like scrapping stamp duty on shares, would be more effective in reinvigorating the market. “I do wonder if the regulation has gone too far or is not pointed in the right direction,” he said.
Despite his concerns about overregulation in some areas, Bresler noted that other sectors, particularly cryptocurrencies, remain worryingly under-regulated. He expressed frustration over the lack of scrutiny applied to the booming cryptocurrency market, especially given the risks it poses to retail investors. “There are other parts of the industry, for example crypto, which don’t enjoy the same level of scrutiny, which have far higher-octane asset classes underneath them,” he remarked.
Bresler’s concerns echo those of the Treasury Committee, which last year called for cryptocurrencies to be regulated in a manner similar to gambling. While the FCA has restricted how crypto assets can be marketed, the sector remains largely unregulated, leaving consumers vulnerable to the risks of volatile and speculative assets.
“It’s nuts to me that it doesn’t get more attention,” Bresler continued, warning of a “wild west” situation in the crypto space. His remarks underscore the challenges regulators face in balancing the need to protect consumers while fostering innovation in rapidly evolving markets.
As discussions around financial regulation continue, the focus remains on finding the right balance. Bresler’s call for reform is likely to add fuel to the ongoing debate about the role of regulation in shaping the future of the UK’s financial sector. For now, the question remains whether the red tape will loosen or if the banking industry will continue to grapple with its growing regulatory burden.