Financial Regulation: Striking a Balance for Growth and Stability
Regulating the financial system is crucial to mitigating vulnerabilities, according to Andrew Bailey, Governor of the Bank of England. He emphasizes that economic growth and financial stability are interdependent and that deregulation may have detrimental consequences.
Bailey highlights that the 2008 financial crisis demonstrated the importance of regulation for maintaining sustainable growth. However, he also cautions against excessive deregulation, stating, "Memories disappear in the rear-view mirror."
He urges policymakers to consider a range of tools for addressing vulnerabilities, not solely relying on increased regulation. "We must not forget the lasting damage done by the global financial crisis," says Bailey.
His comments come as the Bank of England recently revised its growth forecast for the UK due to low productivity. Bailey suggests that pension reforms could unlock higher growth and prevent the country from being stuck in a low-growth trap.
The debate between growth and stability continues, with policymakers seeking to balance the need for regulation with the risks of over-regulation and the potential consequences for economic growth.