Knight moves to reduce red tape in City
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Your support makes all the difference.Angela Knight, the Treasury minister, yesterday promised that financial firms with excellent track records could be subjected to less intensive monitoring from the regulators.
As she launched a drive to promote deregulation in the City, Mrs Knight rejected suggestions that the timing of the Government's City deregulation initiative was bad. The drive comes in the wake of the scandal at Morgan Grenfell, which is owned by Deutsche, one of only half-a-dozen triple- A rated banks in the world.
Mrs Knight said: "You can never regulate to prevent somebody behaving in a way that is totally irresponsible.
"If such widely used systems as debit cards and the Bank Automated Clearing System can operate with the minimum of regulation, it stands to reason that other areas can be freed from red tape too."
However, it emerged that there was increasing concern among financial regulators, who launched a new programme to streamline the rulebooks nearly a year ago, that the City had misunderstood the likely impact of changes under way.
One source said that despite the Government's drive to reduce red tape "it would be misconceived to believe that the impact of deregulation will be less regulation".
There will be a reduction in the number of detailed rules companies have to obey. But in return, firms will have to reinforce their own internal control systems to prevent abuse of customers, and there will be much more intensive monitoring of these systems by the regulators - and probably no reduction in the overall burden of regulation on the City.
Mrs Knight was speaking with Roger Freeman, the deregulation minister, at a seminar at which City firms were invited by the Government to give their views on how the burden of regulation could be lowered. The participants gave the ministers a shopping list of 21 changes and Mr Freeman promised a reply within a month, saying the Government "will, wherever practicable, act on them".
Among the proposals from the City were to give companies more discretion in fact finding about customers, to allow financial salesmen scope to give limited rather than comprehensive advice and to put more effort into educating consumers about their finances.
Nobody on the floor raised the question of Deutsche Morgan Grenfell and Mrs Knight believed that if the participants felt it was significant for the whole of the regulatory regime, the question would have been raised. If changes were made as a result of the affair, they would be "minor rather than major".
Regulators should not rush into writing new rules because an individual or organisation did not live up to requirements, Mrs Knight said. She believed that deregulation was about reducing bureaucracy and ensuring regulatory activity was in proportion to the likely problems.
The next move was to promote a cost-effective regulatory system, which the Securities and Investments Board was pushing forward, she said.
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