The financial services industry needs to show it can use power and influence “responsibly” before regulation can become less strict, according to Phoenix Group chair and former Lord Mayor of London, Nick Lyons.
Speaking at the Equity Release Council Summit last week, Lyons said if the financial services industry wants to have a change in regulation it must demonstrate responsibility in its use of power.
“I have spoken throughout my mayoralty about financial services and the fact that we’ve had a leading and preeminent financial services centre in London for 400 years,” he stated.
“We’ve always been resilient, we’ve always been resourceful, but we haven’t always been responsible.”
Lyons said this is particularly important given the UK’s current economic environment.
“We have a significant climate of risk aversion in this country, nothing has changed much since the global financial crisis,” he explained.
“After the crash, we gave primary objectives to both the Financial Conduct Authority and the Prudential Regulation Authority basically to make sure we never have a global financial crisis again.”
He added that, as a result of this objective, both regulatory bodies have “smothered” financial services with regulation.
“Where do we go? Governments don’t really have many levers to pull. They can’t pull the ‘borrow and spend’ lever and they can’t pull the ‘tax and spend’ lever very much either,” he said.
As a solution, Lyons suggested the private sector, and financial services more specifically, needs to “step forward”.
Pensions
Lyons also discussed another pressing issue for financial services, pointing out the UK has the second largest pension system in the world which is valued around £4-5trn.
However, he added that not very much of it is invested in productive assets and that the industry needs to “deliver the returns on those savings".
One such way to increase these returns, according to Lyons, is to amend the current auto-enrolment system.
He explained that currently 8 per cent is being contributed, 5 per cent of which is put in by employees and 3 per cent is put in by employers.
Lyons described this system as “woefully inadequate”.
“At Phoenix we talk about moving auto enrolment to 12 per cent but even that is only the start of the journey frankly.
“We need to get to the sort of levels that Australia is talking about, which is up to 15 or 16 per cent.”
tom.dunstan@ft.com
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