ALEX BRUMMER: Jeremy Hunt bids to unleash global Britain

The recent turmoil in the banking sector has not dampened Chancellor Jeremy Hunt’s enthusiasm to press ahead with financial reforms aimed at boosting growth rates in the UK over the medium term.

He joined Bank of England Governor Andrew Bailey in expressing confidence in the resilience of the UK banking system and is ready to consider lifting current consumer deposit insurance above the current £85,000 if that were the case. system security improves.

Hunt, however, is cautious about going too far and creating “moral hazard.”

The Chancellor is firmly behind the Edinburgh Reforms (Big Bang 2) and wants British pension funds to play a greater role in bringing IPOs back to the London Stock Exchange.

As one of the world’s leaders in hi-tech, third only to the US and China, he aims to divert funds such as local government schemes from an obsession with low-yield, fixed-rate global investment funds.

Hunt wants them to commit to hi-tech start-ups, privately held companies and other asset classes. Most importantly they should support UK plc.

A generation ago, 50 per cent of final salary pensions in the UK were invested in the FTSE 350 companies.

That has dropped to 2 percent. Unleashing new investment in Britain is a high priority, despite the fragility of the global economy.

It will be easier said than done to convince over-cautious pension funds to commit their trillions of pounds of assets.

The governor’s reboot

Andrew Bailey cuts a different figure at the IMF spring meetings.

In October, he found himself in the vortex of the liability-driven investment crisis (LDI), which nearly collapsed the final salary pensions of 10 million people and threatened to jeopardize the banking system.

The Governor spoke of ‘all-nighters’ to solve the problem. While the near-catastrophe happened under his watch and the possibility of trouble was noted in the more distant reaches of the Bank of England’s stability report, Bailey never really explained why regulators didn’t act sooner to prevent a problem.

It was clear that it was never wise to use derivatives based on UK government bonds to boost returns. Even worse, it turns out that many of the LDIs at the heart of the problem were overseas based.

After weathering the storm with the financial system more or less intact, Bailey has a completely different mission.

As a result of the recent global banking turmoil, he wants stronger cash buffers in regulated banks and a higher level of deposit insurance.

He also calls for a return to the drawing board and more international support for a ‘settlement regime’ that does not sideline central banks and ultimately taxpayers.

Despite all the bravado about how the US and Swiss authorities handled Silicon Valley Bank and Credit Suisse, there is an admission that devices such as CoCo bonds (fixed income securities that score higher than equity in bank bailouts) just didn’t work.

In his public appearances here, Bailey sounded confident that the fractures in the banking system seen so far do not pose “systemic risk.”

Bailey has focused on how technology has dramatically changed the rate at which deposits can evaporate many times over. This makes it much more difficult for supervisors to catch a falling knife.

He argues that the biggest problems lie outside of regulated banks – in pockets such as LDIs, the nickel market and the collapse of the Archegos hedge fund.

It is a quieter story of a central banker who has gone through the wringer.

At the IMF meeting, the focus so far has been on how the rise in interest rates to fight inflation has backfired on advanced country banks.

What it means in terms of Western banks’ exposure to emerging market and poor country debt — and the potential for massive write-downs — could be the next hurricane.

fan zone

Anyone who watched IMF Director Kristalina Georgieva’s spring press conference yesterday might think he had landed on a street market.

Reporters jumped out of their seats, waved their arms manically and shouted the names of their countries.

At one point, it was feared that a wrestling match would break out between Nigeria and Afghanistan as they sought recognition from the moderator.

From the back of the room came the plaintive cry, “What about Mongolia?”