Rate setter calls for market digitalisation and touts Bank of England’s flexibility
Bank of England rate setter Dave Ramsden has called for bold action on digitalisation in a rebuke of concerns that the Bank’s prescriptive rules were stifling innovation.
Speaking at the Innovate Finance Global Summit on Tuesday, the central bank Deputy Governor said widespread innovation in wholesale financial markets from authorities and industry would boost the UK’s finance sector.
He cited the Bank of England’s challenge “to be ambitious… both as an infrastructure provider with the renewed real time growth settlement core settlement engine, and in the context of wholesale payments more generally.”
This involved an evolving stance on settlement methods, which Ramsden signalled the bank was becoming increasingly flexible on.
“We may, in some circumstances, be comfortable with resettling in commercial bank money in the first instance when they do not represent systemic risk.”
Ramsden called for authorities and the industry to seize “the opportunity to [use] new technology for the next generation of wholesale payments and settlements” adding it would “require bold and clear action”.
Ramsden’s remarks follow criticism from Innovate Finance over the Bank of England’s attitude towards payment innovations such as stablecoins.
The central bank risks “killing” London’s potential to become a global hub for stablecoins with its “prescriptive” rules, the industry body warned.
It called for rapid creation of a regulatory regime to support the use of digital assets to capitalise on London’s dominance of the foreign exchange market – where it accounts for as much as 40 per cent of global trading.
Innovate Finance’s report said the UK’s chances of gaining a foothold in the $200bn industry was being restricted by the Bank of England’s position on holding limits and asset-backing requirements.
Ramsden: ‘Compelling’ case for modernising markets
This comes ahead of the Treasury’s inaugural Financial Services Growth and Competitiveness Strategy, pencilled in for Spring 2025.
The Chancellor held a summit with leading fintech executives to discuss the upcoming strategy plans, and how the industry can drive wider economic growth.
Ramsden said: “The economic case for modernising capital markets is compelling.
“Efficient capital markets direct capital to its most productive use – lowering the cost of capital and supporting long-term economic growth.”
Ramsden cited the potential for operational efficiencies of 40 per cent across a bond full life cycle as a way to scale up competitiveness in the financial sector through digitalisation.
The Deputy Governor touted Monday’s launch of the Real-Time Gross Settlement – an infrastructure that facilitates final, risk-free settlement of sterling payments in central bank money
On its first day of operation the system settled payments totalling £778bn, Ramsden revealed.
He said the new system was a “digital public infrastructure” which “provides a leading edge technology platform, increasing resilience and improving user function and functionality.”
On the back of RGTS, Ramsden said the bank plans to launch a “synchronised settlement interface”.
This endeavours to open RGTS to work in conjunction with other ledgers to achieve atomic settlement – a transaction process where the transfer of assets between parties is completed in a way that either all parts of the transaction succeed or none do, reducing risk.