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Brexit: Truss wants ‘call in’ power to allow ministers to overrule City regulators

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The Tory leadership frontrunner wants to revive the policy, which was recently ditched by the Treasury, as a part of the government's push to diverge from the EU's City rulebook.

Liz Truss wants to give ministers the power to overrule decisions made by the UK’s financial services regulators in a move that is set to create serious tensions with the Bank of England.

The Tory leadership frontrunner wants to revive the policy, which was recently ditched by the Treasury, as a part of the government’s push to diverge from the EU’s City rulebook.

The Financial Times reports that Truss has told allies she “definitely” wants to pursue the change to combat City regulators making decisions that are deemed to be too cautious.

The call-in power was set to be included in the government’s post-Brexit Financial Services and Markets Bill, however it was removed by new chancellor Nadhim Zahawi after pressure from Bank of England governor Andrew Bailey.

Bailey told a Westminster committee last month that the City’s “international standing” depends on “the independence of regulators”.

Truss’ insistence on giving the government powers to override the Financial Conduct Authority and the Bank of England-run Prudential Regulation Authority (PRA) will cause early tensions with Bailey if she wins the Tory leadership contest next month.

It comes after she has already called for a review of the Bank of England’s mandate and has criticised the central bank for the scale of its Covid Quantitative Easing programme.

The Financial Services and Markets Bill creates a mechanism to shed hundreds of EU rules and forces regulators to consider the UK’s international competitiveness when making new decisions.

The EU’s Solvency II and Mifid directives are set to be quickly changed in a bid to free up firms to invest billions more in capital projects.

It also gives the government the power to ask regulators to review decisions they have made, however this falls well short of the initial call-in proposal.

Truss has reportedly been speaking to City executives to assure them that she wants to move faster on post-Brexit changes to the UK’s financial services regulations.