Bank of England governor urges caution over financial deregulation for growth

Bank of England governor Andrew Bailey sounded the alarm against rolling back financial regulation and argued that there is no compromise between financial stability and and stoking growth and competitiveness, in a speech on Friday.

The speech effectively argued that while growth is important, regulation is needed to prevent another banking crisis.

"The growth issue, is crucial," Bailey said at the farewell symposium for Klaas Knot, a Dutch central banker who ended a term as chair of the Financial Stability Board in July. "Our economies rely on financial risk taking, and that is essential to support investment and growth."

He cited technological advancements such as the rise of alternative asset classes such as crypto as a potential future risk to stability.

He said crypto is an area that requires "thorough assessment of possible vulnerabilities and their financial stability implications."

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He also said the banking system needs to be ready to mitigate against the potential future risks of AI in financial services.

"Our system must be constantly assessed and adapted as needed," he said. "But that process must be grounded in the core principles and ideas of financial stability."

The comments come as the government faces tough decisions around ways to manage stoking growth in the economy, with chancellor Rachel Reeves previously pledging to cut red tape to allow for "informed risk-taking" in financial services.

Bailey added that he didn't think that tougher regulations post global financial crisis was a cause of weak productivity and growth since then.

Earlier this week, new ONS figures showed the UK economy grew by an unrevised 0.3% in the second quarter, confirming a sharp slowdown. The figures came a day after Reeves delivered a speech at the Labour party conference, in which she pledged an approach rooted in "securonomics", emphasising economic stability and sensible spending over calls to shake up fiscal rules.

The next Bank of England rate-setting meeting is on the calendar for 6 November, ahead of the government's autumn statement on 26 November.

The Bank of England reduced its main interest rate to 4% in August 2025 but held it at that level in September. Market watchers have predicted a high chance of a 25 basis point cut in November.

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