The Power of Big FinanceHow to reclaim our democracy from the banking lobby

Contents
Executive summary
Summary of recommendations

6
8

Introduction

9

1. Financial ties

11

1.1. Spending on parliamentarians

11

1.2. Donations to political parties

17

2. Lobbying

21

2.1. Meetings with the Treasury

22

2.2. Dominating consultations

24

2.3. The finance lobby’s resources

26

3. Revolving doors

29

3.1. Revolving doors with the Treasury29

3.2. Revolving doors with the Bank of England34

		3.2.1. Monetary Policy Committee37		

3.2.2. Financial Policy Committee41		

3.2.3. Prudential Regulation Committee

45

4. Narratives

50

4.1. Supporting the ‘real economy’

50

4.2. Providing a COVID-19 lifeline

54

4.3. Tackling climate change

56

5. Economic dependence

58

6. Recommendations

61

6.1. Tackling conflicts of interest, lobbying, and the revolving door

61

6.2. Promoting a regulatory framework that serves the public interest

67

6.3. Reducing our economic dependence on banks, card companies andprivate sector finance69

7. Conclusion

71

Bibliography

72

2 The Power of Big Finance June 2022

List of figures, tables, and boxes
Table 1:Five MPs with largest cumulative payments received from the 			financial sector 2020-21.
12

Table 2:

All peers’ interests in the financial sector.

14

Table 3:

Economic Affairs Committee: financial sector interests of past andpresent committee members.

15

Table 4:

Economic Affairs Committee: financial sector interests of committee members.

15

Table 5:Largest 10 donors to political parties from the financial sector 2020-2021.

17

Table 6:Percentage of respondents to consultations in different regulated areas 1996-2013.

24

Table 7:

Paid positions held in the for-profit financial sector by Chancellors of the
Exchequer 1983-2021.

31

Table 8:

Positions held in private finance by Monetary Policy Committee members 1997-2021. 37

Table 9:Positions held in private finance by Financial Policy Committee members, 2011-2022. 42

Table 10: Positions held in private finance by Prudential Regulation Committee members/
Prudential Regulation Authority board members 2013-2022.

46

Figure 1: Hourly rate of pay from the financial sector.

13

Figure 2: Proportion of donations to political parties from private finance.

19

Figure 3: Proportion of Treasury minister meetings per sector in 2020 and 2021.

22

Figure 4: Total number of Treasury minister meetings with different sectors in 2020 and 2021.

23

Figure 5: Distribution of groups that responded to financial regulatory consultations 1999-2013. 25
Figure 6: Distribution of preferences across groups towards financial regulation.

26

Figure 7: Proportion of former UK Chancellors who have worked in private finance 1983-2020. 30
Figure 8: Percentage of Bank of England policymakers that have worked in the 			private financial sector 1997-2021.
35
Figure 9: Bank lending allocation in the UK.

52

Figure 10: Total value of fines issued to the top 10 most heavily fined sectors in the UK.

53

Figure 11: Total number of bank and building society branches in the UK.

54

Figure 12: Total number of free to use ATMs in the UK.

55

Figure 13: Bank concentration in the UK.

59

3

Box 1: Hourly rate of pay to MPs for services provided to financial institutions.

13

Box 2: Are conflicts of interest shaping financial policy agendas?

15

Box 3: All Party Parliamentary Groups’ funding.

20

Box 4: The Owen Paterson lobbying scandal.

21

Box 5: How revolving doors affect access to the UK government.

32

Box 6: Bank of England committee members’ shareholdings.

34

Box 7: Insufficient cool off periods.

36

Box 8: Estimates of the financial sector’s contribution to total economic output            are methodologically flawed.

51

Box 9: Did Brexit display the limits of the political power of finance?

59

4 The Power of Big Finance June 2022

ACKNOWLEDGEMENTS
We would like to thank Partners for a New Economy for generously funding this project.
We are also grateful to Fran Boait, Danisha Kazi, Anna Pick, Laurie Macfarlane, Rob Macquarie,
Marloes Nicholls, Benjamin Braun, Manolis Kalaitzake, James Scott, Stefano Pagliari, and        Kenneth Haar for helpful discussions and feedback.
AUTHORSDavid Barmes, Nikki Eames, Zack Livingstone, Chloe Musto and Simon Youel.

PERMISSION TO SHAREThis document is published under a creative commons licence.
Attribution-NonCommercial-NoDerivatives 4.0 International.

5

Executive summary
Everyone deserves an equal voice in our democracy, but over decades, corporate
lobbyists have exercised excessive influence over the system and a handful ofpoliticians have let them, writing the rules in their favour. Taken together, ‘Big Finance’— banks, investment firms, insurance companies and other large financial firms —form the most powerful interest group in the UK, and have leveraged that power todesign a system that puts their commercial priorities above the public interest.
Decades of economic policymaking has prized the growth of the City of London above all otherregions of the country and sectors of the economy. Whole industries and communities have been
neglected and households drowned in debt to feed the financial sector’s growth. This prioritisation offinance is maintained by the sector’s ability to exert influence over the policymakers who make therules. If we are to genuinely ‘level up’ the whole of the UK and address inequalities, we will need toensure that the voice of the City of London does not overpower all others.
Following Brexit, the future of UK financial regulation is there for the taking. The financial sector
and its allies in government are seizing this opportunity to further entrench a regulatory frameworkthat prioritises the growth and ‘international competitiveness’ of the City. The last time we allowedfinancial regulators to become cheerleaders for finance, we ended up with the global financial crisisof 2007-08, which had devastating consequences for the public.
This report illustrates the extent to which powerful financial firms are exerting substantial
influence over the policymaking process through the following five channels: financial ties withparliamentarians, lobbying key decision-makers, maintaining a revolving door between finance andgovernment, promoting false narratives, and opposing reforms that would reduce the economy’s
structural dependence on financial firms.
Recent polling shows that 76% of the UK public do not believe that Members of Parliament will makedecisions that improve their lives (Carnegie UK, 2022). The public is losing faith in our democracy’s
ability to deliver outcomes that serve our shared interests, and it’s easy to see why. The pandemic,
the climate crisis, and the cost of living crisis are demonstrating how vital it is to have public
institutions that work for the public good, and to make sure those in power can’t exploit their position
for personal gain. And yet corruption and conflicts of interest have repeatedly made the headlines
over recent years. We need public institutions that we can trust to show integrity and act in ourbest interests.
To achieve financial policymaking that genuinely serves society, we need to introduce new rulesthat guard against conflicts of interest, disincentivise parliamentarians, civil servants and regulatorsfrom shifting to and from the financial sector, improve lobbying transparency, and establish arobust regulatory framework for the financial sector aligned with the public interest. To minimise
our economic dependence on banks and card companies, the Bank of England should launch acentral bank digital currency and operate it as a public utility, providing a fair and inclusive payment
method for all. Finally, the government should support the establishment of a diverse ecosystem of
stakeholder banks.
6 The Power of Big Finance June 2022

It’s high time we reclaim democratic control over our financial system and put it to good use,channelling finance towards a fair and sustainable economy.
Channels through which big finance exerts influence

ChannelFindings

Financial ties

Financial institutions and individuals closely tied to the sector collectively spent£2.3 million directly on MPs throughout 2020 and 2021, partly as payment forsecond jobs and speeches, and partly as donations, gifts, and hospitality.
A fifth of peers in the House of Lords have registered paid positions at financial
institutions, including over half of peers on the committee responsible forinvestigating matters related to economics and finance.
Financial institutions and individuals closely tied to the financial sector donated a
total of £15.3 million to political parties throughout 2020 and 2021.

Lobbying

Close to a third of Treasury minister meetings in 2020 and 2021 were with thefinancial sector and its lobbyists, far more than any other sector.
There are at least 18 finance trade associations and industry groups in the UKwith turnovers above £1 million, with a combined annual turnover of more than£145 million in 2020-2021.
Finance-related consultations are frequently dominated by business interests
advocating for weaker financial regulation.

Revolvingdoor

Every single former Chancellor of the Exchequer in the past 40 years has goneon to take up paid positions in the financial sector after leaving public office.
Over the past decade, financial institutions that hired a former UK Chancellor
benefited on average from a 59% increase in meetings with government
departments.
Almost three quarters of all past and present Bank of England decision-makers
have held roles in private finance.

False
Narratives

Powerful financial institutions and their allies in government are attempting tobuild political and public support for the sector by presenting it as the ‘engine of
the economy’ and a solution to environmental breakdown.
These narratives misrepresent the overall impact of the UK financial sector,
which neglects investment in small businesses and the real economy, andcontinues to finance fossil fuels to the tune of tens of billions of pounds annually.

Economic
dependence

The banking sector derives political power from the persistence of ‘too big to fail’banking, and from the fact that policymakers often utilise the financial sector to
implement economic policies.
The City of London also holds political power on an international scale, as it
remains a globally dominant financial centre that other economies depend on.

7Summary of recommendations
Recommendation 1: Strengthen standards for the registration of interests for MPs, peers,               and Ministers by updating the Members’ Code of Conduct and Ministerial Code.
Recommendation 2: Ban second jobs for MPs except for public service roles, and cap the amountthey can be paid for speeches.
Recommendation 3: Cap political party donations and require All-Party Parliamentary Groups(APPGs) to disclose funding sources.
Recommendation 4: Extend the statutory Register for Consultant Lobbyists to include in-house
lobbyists by amending the Transparency of Lobbying, Non-Party Campaigning and Trade Union
Administration Act.
Recommendation 5: Update the Ministerial Code to require departmental disclosures to be
published on a monthly basis and to include essential information about the content of meetings.
Recommendation 6: Reform the appointment process for the Bank of England’s committee
members, ban future external committee members from holding positions at regulated financial
institutions while serving at the Bank, and require committee members to disclose their             financial interests.
Recommendation 7: Update the Business Appointment Rules to establish longer ‘cool off’ periods
and bans on lobbying for ministers, civil servants, and independent regulators, and establish astatutory body to enforce these rules.
Recommendation 8: Discard plans to introduce growth and international competitiveness objectives
for regulators, and instead introduce statutory objectives on financial inclusion and alignment with theParis Agreement.
Recommendation 9: Require the FCA and PRA statutory panels to consist of at least 50% public
interest representatives.
Recommendation 10: Establish a new financial services joint committee to provide in-depth scrutiny
over changes to legislation and regulation.
Recommendation 11: Implement a fair and inclusive digital payment method provided as apublic utility.
Recommendation 12: Foster a more diverse banking ecosystem that serves the needs of local
economies and communities.

8   The Power of Big Finance June 2022

Introduction
A battle over the future of financial regulation is in full swing. Having exited theEuropean Union (EU), the United Kingdom (UK) government is in the midst of amulti-year legislative process to develop a new regulatory framework to govern its
financial system. By establishing a new framework for financial rule-making, including
regulatory objectives and principles, accountability mechanisms, and stakeholder
engagement processes, this new legislation will determine the future direction of thefinancial system and whose interests it serves.
To capitalise on this defining period in financial regulation, private finance is aligning and mobilisingbehind a deregulatory agenda to maximise profits at the expense of wider society.1 In the mostrecent phase of the regulatory review, financial institutions backed plans for the ‘international
competitiveness’ of the financial sector to be reinstated as an objective for regulators (UK Finance,2022). The Queen’s Speech reaffirmed the government’s intention to move ahead with this reform in
a new Financial Services & Markets Bill (HM Treasury, 2022).
In the past, a competitiveness objective resulted in regulators adopting a ‘light-touch’ approachthat allowed the reckless and fraudulent practices responsible for the 2008 Global Financial Crisis(GFC) (Thomas, 2021). Recent polling reveals that two thirds of the public believe the government’s
proposal is out of touch and elitist, while nearly seven in ten (67%) people think the proposal
puts the needs of the City of London first, undermining the government’s levelling-up ambitions               (Finance Innovation Lab, 2022).
To ensure that the new regulatory regime is designed in the public interest, it is necessary tounderstand how private finance is exerting power over the policymaking process to achieve
deregulatory outcomes. The impact of finance’s different forms of power varies over time, and has
been the subject of intense academic scrutiny and debate (James and Quaglia, 2018). Most recently,
many viewed Brexit as demonstrating the limits of finance’s power, given the sector’s failure to win its
overwhelming preference for retaining access to the Single European Market (Thompson, 2017).
However, with the support of qualitative and quantitative empirical evidence, and drawing on thelatest scholarly research, we argue that finance remains a disproportionately dominant player inshaping the policies that govern it. We identify five key channels that provide the financial sector with
political power: (i) financial ties; (ii) lobbying; (iii) revolving doors; (iv) narratives; and (v) economic
dependence. The report is structured around these channels of power.

1. It is important to note that not all financial institutions are focused on maximising profits at the expense of the wider public interest.       In particular, there is a small but growing movement of ethical finance providers, including credit unions and regional mutual banks,     that operate according to social and environmental principles. We use the term ‘private finance’ broadly to refer to for-profit financial
sector firms. We use these terms, as well as ‘financial sector’ and ‘private financial companies’, interchangeably throughout the report.
9Section 1 — financial ties — details the interests that parliamentarians hold in the financial
sector, as well as the donations that political parties receive. The financial sector spent           £2.3 million directly on MPs throughout 2020 and 2021, paid one in five peers in the House of Lords(including a majority of those on the Economics Affairs Committee) as employees, and donated  
£15.3 million to political parties in 2020 and 2021.
Section 2 — lobbying — covers the financial sector’s mobilisation of resources to lobby
financial policymakers. In 2020 and 2021, close to a third of all Treasury Minister meetings werewith financial institutions and their lobby groups, far more than any other sector. Furthermore,business interests dominate public consultations relating to private finance, advocating for weaker
financial regulation. While the total lobbying spend of the financial sector was estimated at £93 million
in 2012 (Mathiason et al., 2012), we find that the finance lobby groups alone recorded a total turnoverof over £145 million in 2020-21.
Section 3 — revolving doors — outlines how individuals seamlessly shift back and forth
between high-ranking public service roles and the financial sector. We find that every single
Chancellor of the Exchequer in the past 40 years has gone on to work in private finance, andfirms employing a former Chancellor benefited on average from a 59% increase in meetings withgovernment departments over the past decade. Meanwhile, three quarters of current and former
Bank of England (BoE) decision-makers worked in private finance at some point in their careers,
while close to a quarter retained roles in the financial sector while serving at the BoE.
Section 4 — narratives — outlines the stories that the financial sector promotes about itself,with the support of its allies in government. As we face the interconnected challenges of soaring
inequality, COVID-19, and environmental breakdown, private finance claims to be the UK’s engine
of economic growth, innovation, and efficiency. We outline evidence to the contrary, showing that the
UK’s oversized financial sector has harmed the real economy, driven environmental collapse, andfailed to provide adequate support to vulnerable customers during the pandemic.
Section 5 — economic dependence — argues that the financial sector also wields excessive
structural power due to the central role it plays in the economy. Banks have become ‘too big
to fail’, as the five largest UK banks account for close to 70% of total banking assets in the country(World Bank, 2021). The City of London also provides core financial infrastructure that policymakers
utilise to implement policy, and international financial markets depend on to operate effectively.
Consequently, many policymakers align their decisions with the financial sector’s preferences bydefault, regardless of explicit lobbying efforts.
Section 6 — recommendations — puts forward proposals on how to counter the strategies ofpower outlined in the first four sections of the report. Despite the significant political power thatprivate finance holds, policy victories for the financial sector are not inevitable:  the power of financecan be broken. To achieve financial policymaking aligned with society’s needs, we need to prevent
conflicts of interest, slow the revolving door, improve lobbying transparency, establish a regulatory
framework aligned with the public interest, and restructure the financial system with the establishmentof stakeholder banks and the introduction of a central bank digital currency that operates as apublic utility.

10 The Power of Big Finance June 2022

1. Financial ties
The Houses of Parliament exist to provide effective scrutiny to government policy.    
As representatives of the public, members of both houses hold responsibility forvoting on financial policy. For each government department, there is an equivalentHouse of Commons Select Committee, which is made up of cross party groupsof MPs, and is responsible for scrutinising the departmental spending, policies,
and administration. The House of Lords Select Committees do not have the same
overarching responsibility for a government department, but investigate specificsubject areas to provide advice.
Financial ties between public officials and private institutions can result in conflicts of interest,     where policymakers or their employers stand to benefit financially from policy decisions. With thevital role that Parliament plays in holding the Government to account, this section covers the financial
ties between private finance and parliamentarians, as well as the financial sector’s donations to        political parties.2

1.1. Spending on parliamentarians
Throughout 2020 and 2021, 47 MPs received £2.3 million from for-profit financial sector firms,
such as investment banks, insurance companies, and wealth management firms.3 This total is basedon MPs receiving direct incomes from second jobs, donations, gifts, and trips outside of the UK.
MPs with the most expensive ties to the financial lobby have been well documented by the media,
as the public have become increasingly enraged with Parliament’s second jobs scandal. As Figure 1
shows, five MPs have earned £1.2 million in direct personal payments from the financial sector in the
period 2020-21.

2. Some interests and paid positions are excluded from the data in this section: not-for-profit financial firms are excluded, as arecharities engaged in financial activity, and minor companies that serve as personal financial arrangements. However, interests and paid
positions in a wide range of for-profit financial sector firms are included, such as those with building societies, mutuals, trading platforms,
sovereign wealth funds and investment consultancy firms.
3. This data is valid up to the 13th December 2021, and covers all declared paid interests on the Register of Members’ Financial
Interests from the start of January 2020 to end of December 2021.

11

Table 1: Five MPs with largest cumulative payments received from the financial sector 2020-21.

Name

Key Roles

John
Redwood

ConservativeMP

Andrew
MitchellFormerTreasury
Minister

Political
Party

Conservativeand Unionist
Party

Conservativeand Unionist
Party

Total
Payments
Receivedfrom Financial
Sector(2020-21)£470,948£218,267

Financial
Institution(s)Services
Provided

Charles
Stanley

Chairman of
Investment
Committee

EPIC Private
EquityAdviser

Investec
Arch
Emerging
Partners Ltd
SouthBridge
Kingsley
CapitalPartners

Theresa
May

Sajid
Javid

Bill
WigginFormerPrime
MinisterSecretaryof State for
Health andSocial Care

Chair of
Selection
Committee

Conservativeand Unionist
Party

Conservativeand Unionist
Party

Conservativeand Unionist
Party£200,270£175,000£133,394

SeniorAdviser

JP Morgan
Chase
Amundi AssetManagement

Speeches

JP Morgan
Chase

SeniorAdviser

HSBC

Speeches

Muzinich &Co

SpeechEmerging
Asset
Management
Ltd

Managing
Director

Allpay Ltd

NonExecutive
Director

Source: Authors’ calculations based on the UK House of Commons Register of Members’ Financial Interests, dated 26 April 2021 and           13 December 2021.
12 The Power of Big Finance June 2022

Although a handful of MPs are paid large salaries from powerful investors, a full 10% of MPs in the2019 Parliament have disclosed within the Register of Financial Interests that they have financial ties
with for-profit financial sector firms and individuals closely tied to the financial sector.
Specific institutions and individuals within this group are particularly overrepresented. For example,
the US-based investment bank JP Morgan was the largest spender on employing MPs, paying
over £300,000 to just three MPs for their speaker engagements and advisory roles. Significant
donations to MPs from individuals linked to private finance included £112,870 from Trevor Chinn                (Senior Adviser to CVC Capital Partners), £65,000 from David Coldman (former Chairman of Brit
Insurance), and £50,000 from Victor Blank (former Chairman of Lloyds TSB).

Box 1: Hourly rate of pay to MPs for services provided to financial institutions
For the 47 MPs that received payments from the financial sector, the average payment
received over the two year period was £48,936. 26 of these MPs documented zero hours ofwork, receiving payments from the financial sector in the form of donations, gifts and hospitality.
For the 21 MPs who recorded work in exchange for payments, the most common services
provided to financial firms were acting as an adviser, consultant, or delivering speeches.            As Figure 1 shows, large sums of money are paid to MPs in exchange for minimal hours ofwork, resulting in extremely high hourly rates. On average, the MPs who completed work forthe financial sector were remunerated at £2,738 an hour.
Figure 1: Hourly rate of pay from financial sector.
£3,000£2,000£1,000£0

AverageMP

Average
Managing Director

Average Financial
Services Worker

Note: Average MP hourly wage is inclusive of speeches and both short and long term work contracts.
Source: Authors’ calculations based on data disclosed in the UK Parliament Register of Members’ Financial Interests (dated            26 April 2021 and 13 December 2021), ONS Average Weekly Earnings by Industry (December 2021), and Emolument (May 2016).
Emolument data is based on 1,433 salaries reported by employees in 18 top London banks, which have not been verified by       the employers.

13

These payments do not break any laws (Transparency International UK, 2015). However, it
is no secret that the main benefits MPs can offer private institutions are insider information,leverage over policy, and direct access to decision-making. As articulated by journalist Richard
Brooks’ oral evidence to the House of Commons Committee on Standards, these jobs are“given to a Member of Parliament because they are a Member of Parliament”, not because ofany meritocratic value that they add (House of Commons Committee on Standards, 2022).

There is a lower standard of transparency in the House of Lords’ register of interests. Peers only
provide brief qualitative descriptions of their interests without any disclosure of income. Furthermore,
peers are exempt from disclosing their interests when on a leave of absence. However, reviewing
the available data, we find that approximately one in five of all peers4 that registered interests havedisclosed paid positions at for-profit firms in the financial sector, which predominantly consist ofsenior management roles, advisory roles, and board memberships. Peers also disclose paid interests
other than employment, often including holding shares in multiple large financial firms. Table 2
provides a snapshot of peers’ interests in the financial sector.
Table 2: All peers’ interests in the financial sector.
Lords that disclosed one or more paid interests in the financial sector

27%

Lords that disclosed one or more paid positions in the financial sector

20%

Source: Authors’ calculations based on the UK Parliament Register of Lords’ Interests as at December 2021.5

Within committees that are particularly influential for the regulation of financial services, we find anumber of clear conflicts of interest in both houses. In 2021, the Treasury Select Committee — 11
MPs responsible for scrutinising all aspects of Treasury, Bank of England, and Financial Conduct
Authority (FCA) policy — included three MPs that held shares in financial institutions or havereceived payments from financial institutions (or individuals closely tied to finance).6 In the House ofLords, the Economic Affairs Committee — responsible for investigating matters related to economic
affairs, including financial regulation — has a severe conflict of interest problem. Over half of the
13 members of the Economic Affairs Committee, including the chair, have disclosed they hold paid
positions with for-profit financial sector firms, and over half of all 48 past and present members   
(2001-2022) that disclosed their interests held paid interests with for-profit financial firms.

4. The figures we arrive at for the peers’ interests exclude 38 peers who are either exempted from disclosure or for whom no disclosuresdata is available.
5. Since December 2021, five Lords have died: Lord McKenzie of Luton (Dec 2021), Lord Hughes of Woodside (Jan 2022), Lord
Sainsbury of Preston Candover (Jan 2022), Lord Myners (Jan 2022) and Lord Chidgey (Feb 2022).
6. Data was collected on the members of the Treasury Committee in December 2021, since then the membership has changed. Current
member, Anthony Browne (Conservative) held shares in two FinTech companies, both valued at over £70,000: Audit XPRT Ltd andCoconut Platform Ltd. Former member, Felicity Buchan (Conservative) declared shares of more than £70,000 in two major US banks:
JP Morgan and Bank of America. Steve Baker (Conservative), also a former member, received a cumulative £19,500 from the Directorof Ranworth Capital Limited and directly from Risk Capital Partners LLP.
14 The Power of Big Finance June 2022

Table 3: Economic Affairs Committee: financial sector interests of past and present committee
members.7
Members that disclosed one or more paid interests in the financial sector

52%

Members that disclosed one or more paid positions in the financial sector

44%

Source: Authors’ calculations based on the UK Parliament Register of Lords’ Interests as at March 2021.

Table 4: Economic Affairs Committee: financial sector interests of committee members
Members that disclosed one or more paid interests in the financial sector

62%

Members that disclosed one or more paid positions in the financial sector

54%

Source: Authors’ calculations based on the UK Parliament Register of Lords’ Interests as at March 2021.

Box 2: Are conflicts of interest shaping financial policy agendas?
There are at least two key areas in financial policy that are currently being shaped by the
conflicts of interest outlined above: the ongoing Financial Regulatory Framework (FRF) review,and the Bank of England’s decision over whether to launch a central bank digital currency(CBDC).
The FRF review, which is determining the future framework for financial regulation in the UK,
has been heavily influenced by the recommendations put forward in the ‘UK Listings Review’consultation process. Launched by Chancellor Rishi Sunak on 19 November 2020 as “partof a plan to strengthen the UK’s position as a leading global financial centre,” the UK Listings
Review examines “how the UK can enhance its position as an international destination for IPOs
and improve the capital-raising process for companies seeking to list in London.”
The Call for Evidence conducted by the Review received submissions from Barclays,
BlackRock, HSBC, and Revolut, among many other financial sector firms, but these are notpublicly available — the firms were assured ahead of submission that “a list of respondents will
be published, but individual contributions will not be published.” After the review’s publication,
the Chancellor formally and explicitly credited it for influencing the Government’s proposals
for the FRF (UK Parliament, 2021). The response confirmed the Government “intends to takeforward each of the recommendations made”, including for HMT to consider “an additional‘growth’ or ‘competitiveness’ objective for the FCA, as part of the Future Regulatory Framework(FRF) Review.”

7. Tables 3 and 4 reflect the interests of 48 peers that were members of the Economic Affairs Committee and disclosed their interests.
19 peers were excluded who either did not disclose their interests due to exemptions, or for whom no disclosure data was available.
15

In addition to the lack of transparency and exclusive access granted to financial sector firms,
the authors of the report were all paid employees of financial sector firms. The Chair of the
UK Listings Review, Lord Hill, has disclosed several paid interests with the financial sector,
including advisory positions with Santander, VISA Europe, Aviva plc, and (previously) UBS
Group. To assist with writing the Review, Lord Hill brought together “an informal advisory
panel”, consisting of a small group of individuals employed by large financial institutions,
including BlackRock, Goldman Sachs, and UBS (HM Treasury, 2021b). Therefore, a small
group of individuals, closely tied to the financial sector, had full control over the contents of
the Review’s final publication and recommendations, and have used this exclusive access to
successfully shape the Treasury’s financial policymaking in their own interests.
Similarly, the central bank digital currency (CBDC) policy agenda is being influenced byparliamentarians with significant conflicts of interest. In September 2021, the House of Lords
Economic Affairs Committee launched an inquiry on central bank digital currencies: The inquiry
collected written and oral evidence, which informed a final report on 13 January 2022 titled‘Central bank digital currencies: a solution in search of a problem?’. The inquiry examined “themain issues confronting HM Treasury and the Bank as they conduct this work”, as well as “howa CBDC might affect the role of the Bank, monetary policy and the financial sector.”
In the report, the Economic Affairs Committee expressed scepticism about the need for a
CBDC. The report’s key findings included concerns about maintaining high standards ofcybersecurity, the risk that the public could perceive CBDC as a threat to privacy, and thepossibility of CBDC facilitating the digital equivalent of bank runs in times of economic stress.
The committee chair at the time of the report’s publication, Baron Forsyth, is quoted alongside
the published report: “We took evidence from a variety of witnesses and none of them wereable to give us a compelling reason for why the UK needed a central bank digital currency.
The concept seems to present a lot of risk for very little reward. We concluded that the idea
was a solution in search of a problem” (Economic Affairs Committee, 2022).
The key findings of the report, and Forsyth’s accompanying comments, show the extent towhich the Committee neglected to engage with the public-interest case for launching CBDC
(Bikas and Livingstone, 2020) and public support for maintaining direct access to central
bank money in a digital economy (Bank of England, 2022). In addition, the report fails to
acknowledge that multiple world-leading central banks (including the Bank of England) havepublished substantial research on possible ways to mitigate the same risks and challenges thereport highlights (Bank for International Settlements et al, 2020).
An important consideration is that the Bank of England launching a CBDC could weaken
the structural power of commercial banks and other large financial sector firms in the UK(see section 5 and recommendation 11). Therefore, there are serious questions to ask about
whether a committee with such deep ties to private finance was in a position to write an
unbiased account of the advantages and disadvantages of a public digital money system. For
instance, Baron Forsyth holds the paid position of Chairman and non-executive Director at
Secure Trust Bank plc, and is also a shareholder. Over 60% of the committee’s active members
have registered paid interests in the financial sector.

16 The Power of Big Finance June 2022

1.2. Donations to political parties
Between the beginning of 2020 and the end of 2021, for-profit financial sector firms, andindividuals with close ties to the sector, donated £15.3 million to political parties. For context,
this means that 10% of all donations to UK political parties in 2020-2021 came directly from thefinancial sector. Table 5 below presents the cumulative donations from the largest 10 financial sector
donors, over the period 2020-2021.
Table 5: Largest 10 donors to political parties from the financial sector 2020-2021.

Recipient Political
Party

Total
Donation(2020-2021)

Donor

Description

Mr Jeremy
Hosking

Founder of investment
management company,        Hosking Partners

The Reclaim Party£2,114,112

Reform UK£500,000

The Rt Hon Peter
Andrew Cruddas

Founder of online trading
platform, CMC Markets Plc

Conservative andUnionist Party£875,750

Mr Malik Karim

CEO of finance advisory firm,
Fenchurch Advisory Partners

Conservative andUnionist Party£813,750

Alan Eldad
HowardCo-Founder of hedge fund,
Brevan Howard AssetManagement LLP

Conservative andUnionist Party£566,130

Lubov Chernukhin

Former investment banker
reportedly at JP Morgan and
ABN Amro.

Conservative andUnionist Party£529,997

Mr David Tilles

Executive Chairman atinvestment management firm,
Mondrian Investment Partners

Liberal Democrats£385,604

Britannia Financial
Group Ltd

Global financial group of a range
of investment, brokerage, andasset management services

Conservative andUnionist Party£385,604

Mr Oluwole O
KoladeManaging Partner at private
equity firm, Livingbridge

Conservative andUnionist Party£255,888

Mr Mark Coombs

CEO of emerging markets
investment manager,            Ashmore Group

Conservative andUnionist Party£250,000

Continued

17

DonorDescription

Mr Howard Paul
Shore

Former Director of investmentgroup, Shore Capital Group
LimitedRecipient Political
Party
Conservative andUnionist Party

Total
Donation(2020-2021)£250,000

Source: Electoral Commission Political Finance Database.8

Donations are a means by which individuals can gain influence over the policies put forward bypolitical parties. The financial sector is overrepresented within this influential group of lobbyists: outof the top 500 largest donations from individuals to political parties from 2020-2021, 46% came fromthose with a financial background. Across the same period, a small group of top donors have been
receiving increasingly direct access to political decision making at the highest level. In February,
The Sunday Times investigation provided evidence that the Conservative Party has established an‘advisory board’ of donors which have given over £250,000 to the party, who meet regularly with thePrime Minister, Ministers and special advisers (Pogrund and Zeffman, 2022). Former investmentbanker Lubov Chernukhin, who donated over £500,000 to the Conservative party in 2020-2021,        has been reported to have used membership of this group as an opportunity to advocate against
taxes on the ultra rich (Pogrund and Zeffman, 2022).
Heavyweight donors from the financial sector have also been granted seats in the House of Lords,
formalising their status as political decision makers. Former Conservative Party Treasurer, Lord
Crudas, was nominated for a peerage by current Prime Minister Boris Johnson. This was against
the advice of the Lords Appointment Commission, due to allegations that Lord Cruddas had offeredlarge party donors access to the Prime Minister to raise money for the Conservative Party (GOV.UK,
2020). Shortly after his accession to the House of Lords, Lord Cruddas donated a further £500,000
to the Conservative Party. Following a notably similar trajectory, Lord Spencer of Alresford, who has
donated to the Conservative Party mainly via his trading group IPGL Ltd, was also appointed to theHouse of Lords following his role as Conservative Party Treasurer (Harris, 2021).
It is not just personal access that major donors seem able to purchase, but also government
contracts for financial institutions that these individuals have personal financial stakes in. Mr Oluwole
O Kolade donated over £250,000 to the Conservative Party between 2020-2021, whilst acting as aManaging Partner at private equity firm Livingbridge. Since April 2020, Efficio, a company owned bya parent company in which Livingbridge holds between 50-100% of shares, won at least £5.9 million
in COVID-19 contracts from the Cabinet Office, Department of Health and Social Care, and NHS
England (Byline Times and The Citizens, 2021).

8. Data is valid for donations to all political parties for entities listed as: Company, Other, Trust, Limited Liability Partnership, Impossible
Donor, Building Society, and Individual, for the years 2020 and 2021. The 500 largest donations from individuals between 2020-2021
were analysed, meaning that this figure is likely a slight underestimation of the total.

18   The Power of Big Finance June 2022

These donations also enable individuals to lobby directly for interest-driven agendas. Figure 2
below shows the breakdown of donations from the financial sector by political party. As the party ingovernment, and therefore in charge of setting policy, the Conservative Party received three quartersof the donations from the financial sector in 2020-2021. Despite their much smaller size, The Reclaim
Party and Reform UK received huge donations from the financial sector. Mr Jeremy Hosking, founderof investment management company Hosking Partners, donated over £2.6 million to the two parties,
which have recently become active in their campaigns for a referendum on net zero. Mr Hosking’s
firm, Hosking Partners, has been reported to have invested £134 million in the fossil fuel sector(Thévoz, 2022).
Figure 2: Proportion of donations to political parties from private finance (2020-2021).

Conservatives (76%)

Political Party

The Reclaim Party (14%)
Liberal Democrats (4%)
Reform UK (4%)
Labour (1%)
Greens (0.5%)
Other (0.5%)£0£2,500,000£5,000,000£7,500,000£10,000,000

Overall Total
Source: Author’s calculations, based on the Electoral Commission Political Finance Database.

As stated by the Electoral Commission, “anyone can give a donation or loan to a political party,
individual or other organisation”, with “no limit”, and responsibility falling to “the political party,
individual, or other organisation to check if the donation or loan is from a permissible source”.
Permissible donors include any company, trade union, or association that is  UK-registered,           and any individual on the UK electoral register (The Electoral Commission, 2022). In turn, donations
from the financial sector have been accepted despite occasionally originating from controversial
sources. Mr Malik Karim donated over £800,000 to the Conservative party whilst CEO of Fenchurch
Advisory, a finance advisory firm. During the same period, Mr Karim is alleged to have earned alarge sum of the profit of the sale of Fenchurch Advisory’s client, LV=, to US private equity company
Bain Capital (Collingridge and Makortoff, 2021). This sale was resisted by LV= members who lostout from the demutualisation of the fund, which was originally set up to provide insurance to theworking poor in Victorian Liverpool (McGibbon, 2021). The Conservative party has also received
substantial donations from Lubov Chernukhin, wife of Putin’s former deputy finance minister Vladimir
Chernukhin (see Table 5). It was recently reported that Vladimir Chernukhin received $8 million in2016, which has been linked to “a politician facing US sanctions due to his closeness to the Kremlin”                   (BBC News, 2020).

19

Box 3: All Party Parliamentary Groups’ funding
Open Democracy recently revealed the extent to which the more than 750 All Party
Parliamentary Groups (APPGs) are being used as a funnel for private sector lobbying,receiving a total of £13 million from private sector companies since 2018 (Hovhannisyan etal., 2022). APPGs are not required to publish their financial accounts, creating a channel forbackdoor financial lobbying. A number of financial institutions feature among the wide range offirms that have donated significant sums to APPGs. For example, HSBC is the biggest donor to
the China APPG, donating £35,500 to the group since 2018, and Visa and Revolut have paid
large sums to the Fourth Industrial Revolution and Internet, Communications and Technology
APPGs, which consider digital policy.

20 The Power of Big Finance June 2022

2. Lobbying
Lobbying is a normal aspect of the democratic process, allowing policymakers to gaina range of views and information from different stakeholders. However, when certain
interest groups gain privileged access to policymakers, and transparency over thisaccess is lacking, lobbying can skew policy outcomes in an undemocratic and unjust
manner. In certain cases, notably where policymakers act as paid advocates onbehalf of private interests, lobbying is politically corrupt. The Owen Paterson scandal(see box 3) most recently threw this type of lobbying into public focus.
In this section, we examine the lobbying that the financial sector engages in independently, without
paying policymakers to act as their advocates. To display how private finance directly accesses
policymakers, this section details the sector’s meetings with Treasury ministers, submissions to
consultations, and financial resources.

Box 4: The Owen Paterson lobbying scandal
A Guardian investigation in 2019 revealed that then MP Owen Paterson had lobbied on behalfof two firms that he worked for: Randox and Lynn’s Country Foods. The former paid him asalary of £100,000, and the latter £12,000, all on top of the £82,000 MP salary. Kathryn Stone,
the independent Parliamentary Commissioner for Standards, subsequently launched aninvestigation to determine the veracity of these allegations and establish whether Paterson had
breached the Code of Conduct (Lawrence et al., 2021).
Stone found that Paterson had indeed consistently lobbied the government and the FoodStandards Agency on behalf of these companies, repeatedly breaching the Code of Conduct’srule against paid advocacy. The House of Commons Committee on Standards concluded that
Paterson’s lobbying represented an egregious breach of the rules and recommended that hebe suspended from Parliament for 30 days. Once the scandal erupted and dominated coverageof the Commons, the government attempted to change the rules to avoid suspending Paterson,
until he resigned a few days later from his role as an MP (Lawrence et al., 2021).

21

2.1. Meetings with the Treasury
As the government’s economic and finance ministry, the Treasury is a powerful player in financial
policymaking. It sets mandates to the Monetary Policy Committee (MPC), the Financial Policy
Committee (FPC), the Prudential Regulation Committee (PRC), and the Financial Conduct Authority(FCA), thereby defining the goals and overarching direction of financial policy.
Currently, the Treasury is responsible for drawing up the legislation that is shaping the post-Brexit
future of financial services regulation in the UK. As shown in Figure 3, close to one in three
Treasury minister meetings throughout 2020 and 2021 were with financial sector firms andtheir lobbyists.
Figure 3: Proportion of Treasury minister meetings per sector in 2020 and 2021.
Other
7.9%

Trade Unions
1.3%

Manufacturing
1.4%

Wholesale & retail trade

Financial sector firms

25.1%

1.9%

Unclassifiable
2.3%

Think tanks, charities &
campaign groups
4.2%

Professional, Scientific &Technical
4.2%

Public admin & defence

12.4%

Education
4.8%

General lobby
5.1%

Information & communication

Media engagements

9.6%

5.2%

Finance lobby
5.3%

Specialist lobby
9.2%

Note: Classification of meetings is based on the standard industrial classification of economic activities (SIC), adapted to distinguishbetween different lobby groups. Multi-stakeholder meetings are classified according to which sector represents 50% or more ofattendees. If attendees are split equally between two or more sectors, or if it is unclear from the Treasury’s disclosure specifically who
was in attendance, the meeting is listed as ‘unclassifiable’. ‘General lobby’ refers to membership organisations that represent businessinterests as a whole across the country, such as the Confederation of British Industry. Meetings with multiple private sector attendees fromdifferent sectors where no one sector met the 50% threshold are also classified as ‘general lobby’. ‘Specialist lobby’ refers to membershiporganisations that represent the interests of a particular sector, type of company, or region. ‘Finance lobby’ refers to membershiporganisations that represent the interests of the financial sector, as well as the City of London Corporation. In multi-stakeholder meetings,
if finance lobby groups and individual financial sector firms combined meet the 50% threshold, the meeting is listed as a ‘finance lobby’
meeting. ‘Other’ refers to sectors that had fewer than 15 meetings with the Treasury.
Source: Authors’ calculations based on Treasury departmental disclosures.

This amounts to a total of 296 meetings with institutions and individuals representing theinterests of the financial sector, far more than any other sector or group in the economy.    
Treasury ministers only met with think tanks, charities and campaigns groups a combined total of
50 times, and trade unions just 15 times throughout 2020 and 2021, depriving civil society of theplatform it needs to put forward a counter-perspective to industry interests (see figure 4).

22 The Power of Big Finance June 2022

Figure 4: Total number of Treasury minister meetings with different sectors in 2020 and 2021.
Financial sector firms
Public admin & defence
Media engagements
Specialist lobby
Finance lobby
Information & communication
General lobby
Education
Professional, Scientific & TechnicalThink tanks, charities & campaign groups
Unclassifiable
Wholesale & retail trade
Manufacturing
Trade unions
Electricity, gas, steam & air conditioning supply
Human health & social work
Extraterritorial organisations
Real estateTransportation & storage
Arts, entertainment & recreation
Construction
Administrative & support service
Mining & quarrying
Accommodation & food service
Water supply, waste management, sewerage & remediation
0

100

200

300

Source: Authors’ calculations based on Treasury departmental disclosures.9

Taking a longer view, we can see that finance has dominated ministerial meetings throughout thepast decade. For instance, lobby group UK Finance has had 217 meetings with the UK government
between 2012 and 2021. Though the financial sector employs an estimated 1.1 million workers,
this is significantly more access to ministers than is provided to the Trades Union Congress (TUC),
who have only had 140 meetings over the same period, despite representing five times as many
workers as UK Finance.10 UK Finance has therefore had nearly 20 meetings per 100,000 workers
represented — eight times the TUC’s at just 2.5 meetings per 100,000 workers.
The numbers are even more stark when looking at the biggest banks. Since 2012, HSBC has had
481 meetings with the UK government (including 162 with the Treasury), and Barclays 479 (139 ofwhich were with the Treasury).

9. Departmental disclosures state the dates of meetings, who was in attendance, and what was discussed. Explanations of the subjectof discussion, however, are very vague, often limited to a sentence fragment describing the perceived purpose of the meeting. For manyof the meetings with financial institutions, for example, the disclosures merely state “meeting to discuss financial services” or “to discuss
UK/global economy and Covid-19”. No further details are provided.
10. Data obtained using Transparency International UK’s Open Access database, searching for all variations of Trades Union Congress.
23

2.2. Dominating consultations
Consultations provide stakeholders with opportunities to share their policy preferences and expertisewith regulators. A study of over 20,000 responses to 562 policy consultations at national andinternational levels between 1996 and 2013 shows that business interests (including the financial
sector) accounted for 89% of responses to consultations concerning finance, compared to 78%
of responses to consultations on agriculture, 78% of responses on health, and 84% responses onenergy (Pagliari and Young, 2014). Therefore, while these findings suggest that consultations ingeneral have not been very effective in gathering a wide range of views from stakeholders, businessinterests dominate finance-related consultations more than consultations in most other sectors.
Table 6: Percentage of respondents to consultations in different regulated areas 1996-2013.
Respondent

Agriculture

EnergyTelecom

HealthFinanceBusiness groups

78.41

84.02

93.14

78.03

89.07

Trade Unions

1.82

1.13

1.06

0.30

1.24

Consumer protection

0.62

0.88

0.92

2.03

0.95

Research institutions

4.80

3.82

1.41

9.08

2.97

NGOs

14.36

10.15

3.47

10.57

5.76

No. of letters coded

3,566

3,191

1,414

2,086

10,965

Source: Pagliari and Young (2014).

In a later study, focusing specifically on financial regulatory consultations, analysis of close to 12,000
responses to 250 consultations carried out between 1999 and 2013 shows further evidence ofbusiness interests dominating finance-related consultations (Pagliari and Young, 2016). Figure 5
shows that for-profit firms submit the vast majority of responses, while unions, consumer protectiongroups, academic researchers, and NGOs participated very little in financial regulatory consultations.

24 The Power of Big Finance June 2022

Figure 5: Distribution of groups that responded to financial regulatory consultations 1999-2013.

Percentage of Goups Mobilising

100

80

60

Regulated Financial Industry
Rest of Financial Sector
Non-Financial Business
UnionsConsumer Protection
Research
NGOs

40

20

0
Note: This data is presented using standard boxplots. For unions, consumer protection, and NGOs, the lack of any visible box indicates thatin the vast majority of consultations, 0% of responses came from these groups. The dots are outliers in the data set.
Source: Pagliari and Young (2016).

Analysing a sample of their dataset, Pagliari and Young (2016) also find that policy preferences
diverge significantly between these two groups. The business interests dominating consultations
tend to advocate for less stringent regulation, while non-business interests tend to advocate for more
stringent regulation. Figure 6 shows this divergence in preferences.

25

Figure 6: Distribution of preferences across groups towards financial regulation.
1

.5

0

-5

-1

Regulated Financial Industry
Non-Financial Business
Consumer Protection
NGOs

Rest of Financial Sector
UnionsResearch

Note: Values closer to one indicate that a group wanted more stringent regulation, while values closer to negative one indicate a preference
for less stringent regulation.
Source: Pagliari and Young (2016).

Despite the low representation of civil society groups in consultation submissions, NGOs havebegun contesting City of London power following the financial crisis, becoming a “more sustained
presence on macro-structural issues” (Baker and Wigan, 2017; p.185). No amount of strategisingand coordination, however, can make up for the deep asymmetry of resources between the financial
sector and civil society, as highlighted in the following subsection 2.3.

2.3. The finance lobby’s resources
The figures presented above are likely only the tip of the financial sector’s lobbying iceberg. Current
disclosure requirements suffer from multiple gaps and weak enforcement. Ministerial meetings, forinstance, have not been recorded in departmental disclosures on multiple occasions. Transparency
International UK provide two recent examples: “there is no official public record of either Robert
Jenrick’s discussion with Richard Desmond over the Westferry development at a party fundraiser, nor
Matt Hancock’s meeting with David Cameron over drinks concerning Greensill’s Earnd app for the
NHS” (Transparency International UK, 2021).

26 The Power of Big Finance June 2022

Even more concerning than the failures of existing registers and disclosures is the sheer amount oflobbying that isn’t covered by any disclosure requirements whatsoever. The Register of Consultant
Lobbyists provides little information and excludes in-house lobbyists, who carry out the vast majorityof lobbying in the UK. Therefore, there is a severe lack of transparency over the extent to whichlobbyists are meeting with MPs, peers, and regulators, and the amount of money private finance isspending on lobbying.
In 2012, the Bureau of Investigative Journalism estimated that the lobbying budget of the UK financial
sector for politicians and regulators to be £93 million a year, used to pay the salaries of over 800
people with the aim of gaining access to policymakers (The Bureau of Investigative Journalism,2012). This estimate involved many assumptions and imputations, but was the best available
measure given the lack of any comprehensive register for lobbyists in the UK.
We find that there are at least 18 finance trade associations and industry groups withturnovers above £1 million. These 18 groups boasted a combined annual turnover of morethan £145 million in 2020/21, providing considerable spending power for the sector to lobby
for its interests. This is in addition to the lobbying resources of individual financial institutions, aswell as the City of London Corporation, which itself plays a key role in lobbying for the interests ofthe financial services sector, and has its own £2.2 billion ‘City’s Cash’ fund it can draw from for suchactivities (Lucas, 2013). £115.5 million of the City’s Cash fund was spent in 2020/21, including morethan £20 million on its Policy and Resources Committee, which is responsible for promoting the Cityof London as “the world’s leading international financial and business centre” (Policy and Resources
Committee, 2022a). Its membership is derived from the financial sector and chaired by Catherine
McGuinness, who is also on the board of lobby group TheCityUK (Policy and Resources Committee,2022b).
Contrary to the UK, companies in the EU are required to disclose their spending on lobbying
activities. In 2016, Corporate Europe Observatory found that the total declared spend of the UK
private financial actors on lobbying EU policymakers was €34 million (Corporate Europe Observatory,2016). This figure covers 50 prominent financial institutions and lobby groups focused on influencing
EU financial regulation. In comparison, NGOs and trade unions had a much lower lobbying budget.
The financial lobby generally outspends public interest lobbies within the EU by a factor of more than
30 (Corporate Europe Observatory, 2014).
In the lead up to the financial crisis, this imbalance between civil society and the financial sector’slobbying power went largely unchecked. Financial regulation was deemed to be within the sphere of“quiet politics”, where the City’s framing of itself as indispensable was ultimately successful (Baker
and Wigan, 2017). However, following the financial crash, public support for the financial sector
plummeted, causing financial regulation to become more politically contested. In Europe, a crossparty group of 22 members of the European parliament (MEPs) recognised that financial regulation
being so heavily shaped by the industry lobby was antidemocratic. Subsequently, in 2011, the MEPs
established the international NGO Finance Watch to counteract this lobby, with the aim to “makefinance serve society”.

27

The UK seems to have moved in the opposite direction: policymakers have doubled down on
support for the overt lobbying power of the City. TheCityUK was created in 2010, following a joint                HM Treasury and City report, with the aim to “demonstrate the importance of the UK financial service
industry”, and a formal link to HM Treasury’s strategy group (Baker and Wigan, 2017). TheCityUK
has become a fully embedded partner to the Treasury on several workflows. Within the UK there has
been an emergence of a diverse range of voices engaging in financial policymaking. However, there
is still no institutional mechanism of access to UK financial policymakers for civil society which isequivalent to TheCityUK.
Overall, while the available data already shows that financial institutions are deeply embedded in
UK policymaking circles, a lack of transparency — particularly over in-house lobbyists’ activities —prevents us from gaining a full picture of the extent to which the lines between policymakers andprivate finance are being blurred.

28   The Power of Big Finance June 2022

3. Revolving DoorsThis section analyses the extent of revolving doors between private finance and thetwo most powerful institutions responsible for financial policy: the Bank of Englandand the Treasury. ’Revolving doors’ refer to the movement of personnel between
financial firms that are regulated by public bodies, and the institutions that create andenforce this regulation. This movement creates several risks.
The first risk is cognitive capture: regulators that have previously worked in private financial
institutions have been socialised within a specific set of ideological frameworks and personal
networks (Dal Bó, 2006). If regulatory bodies are populated with such a lack of diversity, it becomes
extremely challenging for these institutions to maintain an unbiased view of the financial sector.
Regulators can then become willfully blind to seemingly obvious risks, such as the herdlike belief in
an infallible housing market prior to the global financial crisis in 2008 (Bénabou, 2013).
Second, revolving doors result in conflicts of interest: the knowledge that regulators can move into
highly remunerated roles in financial firms following — or during — their time in the public sector
can create incentives for such individuals to act favourably towards this sector. Once in such arole, former public servants can even aid the lobbying process by sharing insider knowledge andprofessional networks (Wirsching, 2018).
Finally, revolving doors between lobbyists and regulators obfuscates the inherently political natureof financial regulation. Recruitment processes to regulatory bodies often favour actors that have
moved frequently between the public and private spheres, and in many cases require experiencein finance at a minimum (Chalmers et al, 2021). Technical expertise gained as governmental, legal
or public affairs advisors within private financial firms may make prospective regulators attractive
candidates (Sim, 2021). However, excessive recruitment from this pool may inhibit finance ministers
from representing the interests of other stakeholders, and Bank of England officials from adequately
fulfilling their primary and secondary objectives. Financial firms only form one interest group, andnearly always push against regulation which constrains their actions (see section 2.2). When deeplyintertwined with this interest group, financial policymakers may lose touch with their role as political
mediators, which must make and enforce difficult decisions in the public interest.11

3.1. Revolving doors with the Treasury
In 2020, the Financial Times revealed just how influential former Ministers and Prime Ministers canbe for financial firms’ lobbying interests. It was reported that former Prime Minister, David Cameron,as an adviser to Greensill Capital, earning $40,000 a day, lobbied ministers and civil servants in the
Treasury on 56 separate occasions in an attempt to secure access to government-run emergency
lending schemes during coronavirus (Smith and Pickard, 2021).  

11. As with section 1, some financial sector firms are excluded from the data in section 3. Positions with not-for-profit financial firms are
excluded, as are those with charities engaged in financial activity and minor companies that serve as personal financial arrangements.
Interests and paid positions in a wide range of for-profit financial sector firms are included, such as building societies, mutuals, trading
platforms, sovereign wealth funds, and investment consultancy firms.
29

Subsequently, the Treasury Select Committee found in their report that the former Prime Minister was“acting as a representative of Greensill, with a very significant personal economic interest in the firm”.
Whilst Mr Cameron has been widely recognised to have been using his networks to lobby for his own
personal interests, this “did not break the rules governing lobbying by former ministers”, showcasing
just how weak the rules are (Treasury Committee, 2021b). It is, therefore, unsurprising that this is
not a one off event. Many former Prime Ministers and Ministers use their previous positions to gain
lucrative positions advising financial firms. For instance, once leaving office, former Labour Prime
Minister Tony Blair became a senior adviser to JP Morgan Chase & Co, with a reported salary of £2
million (Helm and Waterfield, 2008).
Within the locus of financial policymaking power, the Treasury, we find that Chancellors of the
Exchequer have consistently followed a similar path. Strikingly, every single Chancellor who has
held office in the past 40 years has subsequently gone on to take up employment in private
finance (see Figure 7).
Figure 7: Proportion of former UK Chancellors who have worked in private finance 1983-2020.
Worked in private financebefore becoming Chancellor

Worked in private financeafter becoming Chancellor

Source: Information collated from biographies on personal websites, Register of MP’s Financial Interests, Register of Lords’ Interests,
ACoBA correspondence, biographies of employees on financial institutions’ websites, The Guardian, and Companies House.

As the Chancellor sets the mandate that prudential regulators at the Bank of England must follow,
HM Treasury has significant power over the direction of financial regulation. Well-establishedrevolving doors between private finance and the office of the Chancellor result in significant blind
spots in financial regulation. In cases where a Chancellor has worked in private finance before
entering office, as three out of nine in the past 40 years have, it is likely that they were socialisedby these institutions and maintained their former colleagues’ strong preference for deregulatory
policies (Dal Bó, 2006). Chancellors who go on to work in private finance after being in office (as all
Chancellors in our sample did) may have less incentive to pursue stringent regulation whilst in office.

30 The Power of Big Finance June 2022

Research shows that across the OECD, ministers are more likely to be hired by financial entities
following their tenure if they pursue liberalising reforms during their time in office (Wirsching, 2018).
These revolving doors contribute to two distinct forms of moral hazard. Firstly, the close links
between private finance and the Treasury promote a belief within the financial sector that it will
not have to bear the full costs of the risks of deregulation due to the sector’s privileged access togovernment bailouts. Secondly, the potential for finance ministers to move into the financial sector
following their political career creates a viable exit route in the event of a crisis, also mitigating thepersonal risks from deregulation. Ultimately, greater risk taking from both finance ministers and thefinancial sector is incentivised.
Table 7 below shows the positions that Chancellors of the Exchequer held in the for-profit financial
sector prior to and following their time in office. The 40 year time period since the 1980s has been
one of considerable financial deregulation, beginning with the “Big Bang” under Nigel Lawson.
The Big Bang changed the structure and organisation of the London Stock Exchange to expand
membership to anyone who wished to join, turning the City of London into an international financial
centre (Bellringer et al, 2014).  
Table 7: Paid positions held in the for-profit financial sector by Chancellors of the Exchequer
1983-2021 .
Name of
ChancellorYears In
OfficeFinancial Sector
Employer Before OfficeFinancial Sector Employer
After Holding Office

Rishi Sunak

2020Present

Goldman Sachs[In office at the time of
publication]

Theleme Partners
The Children’s
Investment FundManagement
Catamaran Ventures

Sajid Javid

Philip Hammond20192020

Deutsche Bank

20162019

N/A

JP Morgan

Chase Manhattan Bank
Copper.co
OakNorth
Buckthorn Partners
Kuwait Investment OfficeLondonPurl Partnership Limited
Continued

31

Name of
ChancellorYears In
OfficeFinancial Sector
Employer Before OfficeFinancial Sector Employer
After Holding OfficeGeorge Osborne

20102016

N/A

BlackRock Investment InstituteExor NV
Robey Warshaw

Alistair Darling

20072010

N/A

Morgan Stanley

Gordon Brown

19972007

N/A

Pimco

Kenneth Clarke

19931997

N/A

Centaurus Capital

Norman Lamont

19901993

Rothschild AssetManagement

RAB CapitalJohn Major

19891990

Price Forbes

Credit Suisse

District Bank

Global Infrastructure Partners

Standard BankThe Carlyle Group

N/A

Oxford Investment Partners

Nigel Lawson

19831989

Source: Information collated from biographies on personal websites, Register of MP’s Financial Interests, Register of Lords’ Interests,
ACoBA correspondence, biographies of employees on financial institutions’ websites, The Guardian, and Companies House.

Box 5: How revolving doors affect access to the UK government
On average, financial firms that employed a former UK Chancellor increased their number of
meetings with government departments and ministers by 59%.12 If the aim of these firms is toimprove their access to the UK government, maintaining revolving doors between Chancellors
and private finance appears to be a successful strategy.
Privileged access provided by revolving doors has enabled some of the world’s largest asset
managers and investment banks to more effectively lobby the UK government. With $10 trillion(USD) in assets under its management, BlackRock is often referred to as the company that“owns the world”, due to its significant holdings in almost every sector of the economy. Despite
only employing an estimated 3,483 workers in the UK, BlackRock had 128 meetings with the
UK government between 2012 and 2021.

12. Author’s calculations based on the Transparency International UK Open Access database, which covers government meetings fromthe period 01/01/2012- 29/12/2021.
32 The Power of Big Finance June 2022

Just 40 of these meetings took place from 2012 to the beginning of 2017 (an average ofeight a year), before BlackRock employed former Chancellor George Osborne as a ‘politicalconsultant’, paying him a £650,000 salary for just one day a week (£13,000 a day). Since
Osborne stepped through the revolving door, BlackRock’s access to the UK government
has increased dramatically, with the number of meetings the firm has been able to secure
increasing by 100% between 2017 and 2021, to an average of 16 a year.
Following a worryingly similar trend, as shown in Section 1.1. JP Morgan employed Sajid Javid
as a Senior Adviser for almost a year from 2020-2021. Prior to this pairing, JP Morgan had
an average of 11 meetings per year, which increased to an average of 36 meetings per year
during Mr Javid’s employment: a 224% increase. After leaving office as the Chancellor, Alistair
Darling also became employed by a US investment banking giant when he was elected to theBoard of Directors of Morgan Stanley in 2016. Subsequently, Morgan Stanley has increased its
number of meetings with government departments from 4 to over 12 a year: a 208% increase.
The increase in meetings that financial firms are able to access while employing a former
Chancellor is unlikely to be due to random chance. Former Chancellor, Lord Hammond of
Runnymede, was advised by ACoBA prior to becoming a non-executive director on OakNorth
Bank’s Advisory Board to not use contacts acquired as Chancellor to gain privileged access to
the Government for the bank, to secure business or to influence policy (Advisory Committee on
Business Appointments, 2021). However, whilst still employed by OakNorth, Lord Hammondcontacted a member of HM Treasury directly to promote the Bank’s pro bono services, andwas determined to have breached lobbying rules by ACoBA. OakNorth increased its number ofgovernment meetings by 200% in the year and a half in which the former Chancellor had a paidrole with the bank.

Revolving doors between the public and private sectors are, of course, not limited to the realm offinance. In 2016, the Daily Mail revealed that of the 371 ministers that have filed applications to
ACoBA since 2008, two thirds took roles in the field they were responsible for regulating while inoffice (Greenhill, 2016). More recently, the Guardian found that half of all ministers in the past two
governments run by May and Johnson took roles in a private sector that fell within their ministerial
remit. In many cases, these former ministers are still MPs and have taken on these roles as second
jobs (Mason and Stewart, 2021).
In a recent report, the Committee on Standards in Public Life (CSPL) argued that the revolving
door is an issue of greater concern presently relative to 25 years ago, when rules on businessappointments were first established, for two reasons. First, senior civil servants and ministers
leave office at younger ages than they used to. Second, government outsourcing has increased
significantly, which heightens the “risk that private companies may seek to gain advantage throughemploying a former public office holder” (The Committee on Standards in Public Life, 2021).

33

3.2. Revolving doors with the Bank of EnglandCentral banks are powerful and inherently political institutions whose policy decisions havesignificant distributional and systemic implications. Existing research shows that central bankers’
career backgrounds and expectations feed into those decisions: monetary policymakers that haveexperience in private finance tend to vote for higher interest rates during their time at central banks(Adolph, 2013).
Our own research finds that 72.5% of the 80 past and present Bank of England policymakers
have worked at private financial companies.13 Although this figure falls to 63.6% when examining
the current 22 policymakers sitting across the three committees assessed, 18.2% of all present
policymakers continue to hold paid positions in the private financial sector alongside theirdecision-making positions at the Bank of England.

Box 6: Bank of England committee members’ shareholdings
Upon their public appointments, three committee members, Tanya Castell, Huw Pill andNikhil Rathi, disclosed shareholdings in financial firms retained from previous paid positions.
The firms were UBS, Goldman Sachs and the London Stock Exchange Group plc (LSEG),
respectively. Castell was the only one to give details of their shares’ value (“less than £10,000”)and stated an intention to “sell these when possible.” (Bank of England, 2021a). Pill told
the Treasury Select Committee that the Bank of England and Goldman Sachs were in theprocess of agreeing how to “unwind” his shares “as soon as feasible”, a process which will
be completed in January 2023 (Bank of England, 2021b), which means that Pill is voting onmonetary policy decisions while owning shares in Goldman Sachs. Rathi declared his shareswould be sold prior to starting his term at the FCA in October 2020, and that the net proceeds
would be released to him by June 2021, with the possibility of “time-limited clawback” if hisformer employee subsequently found him liable for any negligence (Treasury Committee,2020).
At the Bank of England’s US counterpart — the Federal Reserve — officials were pressured
to sell their stocks late last year over conflict of interest concerns. The officials in question,  
Boston Fed President, Eric Rosengren, and Dallas Fed President, Robert Kaplan, both
highlighted that their investments were aligned with the Federal Reserve’s ethics rules,
indicating that external pressure was responsible for their decisions (Marte, 2021).

13. A total of 80 individuals were assessed, each of whom has been a member of one or more of the following: Monetary Policy  
Committee (MPC), Financial Policy Committee (FPC) or Prudential Regulation Committee (PRC) (formerly known as the Board of thePrudential Regulation Authority).

34 The Power of Big Finance June 2022

The significance of such conflicts of interest cannot be understated: this goes beyond the risks ofcognitive capture from having previously worked in private finance, or acting favourably towards thesector because of future career prospects. These individuals vote on policies that directly impact theirown income, a conflict of interest not permitted for other politically independent public policymakers
such as civil servants. The Bank of England’s justification for allowing committee policymakers to“have an existing interest, or acquire a new interest, which may give rise to an actual or potential
conflict of interest and/or duty,” is that they are independent members, employed by the Bank on apart-time basis and “appointed on the basis of having knowledge or experience which is likely to be
relevant to the Committee’s functions” (Bank of England, 2019). This self-justification acknowledges,
but fails to address, the risks to the public interest posed by such conflicts of interest, which are theprecise reason protocols such as the Business Appointment Rules apply to other public servants.
Figure 8: Percentage of Bank of England policymakers that have worked in the private financial
sector 1997-2021.
Current

Total (1997-2021)

63.6%

72.5%

Note: “Bank of England policymakers” refers to individuals that have been members of one or more of the following committees
during the specified time period: the Monetary Policy Committee, the Financial Regulation Committee, and the Prudential Regulation
Committee (formerly known as the Board of the Prudential Regulation Authority). “Current” refers to the 22 individuals (excluding Treasury
representatives) who are presently sitting on these three committees. “Total” refers to the 80 individuals (likewise excluding Treasury
representatives) who have sat on those three committees since 1997, when the first of the three was established.
Source: Bank of England Annual Reports and Accounts from 1997-2021 were used to establish membership. The interests of individual
members were established from biographies and CVs published on the Bank of England’s website, LinkedIn profiles, and biographies
published by members’ other former and/or current employers.

Regarding the extent to which revolving doors between the public and private sectors exist for Bankof England policymakers, our research found that over three quarters (75.8%) of the 58 former
committee members have been employed by financial sector firms. Over half (53.4%) had done
so before joining the Bank of England, and more than half (53.4%) proceeded to work in this sector
after leaving the Bank.

35

The argument in defence of hiring central bankers from private financial firms leans heavily on the
belief that they will need experience and technical expertise from inside this sector to effectively
regulate it. However, relying heavily on a specific economic sector for technical expertise means theinterests of that sector are overrepresented in the policymaking process. There are plenty of othersectors, such as academia, the civil service and civil society, from which technical expertise can      be gained.
Private sector experience is non-essential to being a successful central banker. Only one of thefour Bank of England governors whose terms fell within the 25-year timeframe examined in thisreport (including the current governor) had a financial sector background. However, all three former
governors did go on to roles in private finance. This highlights the second risk posed by the revolving
door: that the prospect of future private sector employment may elicit decisions favourable to that
sector whilst in public service. While it could be argued that individuals with a background in private
finance would naturally resume employment in this field once their term at the regulator was finished,
this fails to explain our finding that almost a quarter (22.4%) of former committee members whowent on to employment in private finance after leaving the Bank had never worked in this
sector before.

Box 7: Insufficient cool off periods
In 2018, sitting PRC member David Thorburn ended his term several months early to join
the board of Barclays UK and chair the risk committee of Barclays’ retail division (Kleinman,
2018a). Whilst the Bank of England noted that Thorburn was “serving a three-month restriction
period before taking up any outside commitment that would not have been permitted to aserving member of the PRC,” three months was clearly not a substantial enough period oftime to deter Thorburn from lining up lucrative employment with a firm he was responsible forregulating (Bank of England, 2018).
More recently, the UK’s most senior civil servant responsible for financial policy also seamlesslytransitioned into a high-paying role at Barclays. The Treasury’s Director General for Financial
Services, Katharine Braddick, who was previously Director of Prudential Policy at the Bankof England and Head of Banking Policy at the Financial Services Authority, resigned from herrole in 2021 to take up employment as Head of Strategic Policy and advisor to the CEO at
Barclays (Kleinman, 2018b). Despite Braddick’s long public sector career dealing with sensitive
information and policy related to banks like Barclays, the Treasury recommended a mere threemonth waiting period, and ACoBA recommended a six month waiting period before taking up
this employment (Advisory Committee on Business Appointments, 2022).

36 The Power of Big Finance June 2022

3.2.1. Monetary Policy Committee
The policies presided over by the Bank of England ’s Monetary Policy Committee (MPC) — tasked
primarily with keeping Consumer Price Inflation (CPI) close to its 2% target — include setting thebase interest rate, issuing forward guidance on future levels of interest rates, and the purchasing ofgovernment bonds and other financial assets through quantitative easing (QE).14
Since its inception in 1997, 46 people have sat on the MPC, including the nine current members.  
Our research found that four of the nine current members (44.4%) were previously employed byfinancial firms they then went on to set interest rates for, and 29 (63%) of the total 46 past andpresent members have worked at private financial companies.
21 of the 37 former MPC members (56.7%) moved into private finance after leaving the Bank ofEngland, while only 15 (40.5%) had prior experience in the sector. This indicates that policymakers
are arranging private sector employment in the financial sector whilst on the public payroll, whichrisks incentivising them to act favourably towards their future employers.
Table 8: Positions held in private finance by Monetary Policy Committee members 1997-2021.

Name

Dates
served on
MPC

Employed
before and/or
during MPC
membership

Employed
after MPC
membership

Andrew Bailey

2020 -✘

Current

Ben Broadbent

2011 -✔

Current

Sir Jon Cunliffe

2013 -✘

Current

Jonathan Haskel

2018 -✘

Current

Dr Catherine L
Mann

2021 -✔

Current

Citibank; Chase
Manhattan Bank

Huw Pill

2021 -✔

Current

Goldman Sachs

Sir Dave Ramsden

2017 -✘

Current

Michael Saunders

2016 -✔

Current

Financial firm

Goldman Sachs

Citigroup;
Greenwell
Montagu (now partof HSBC)

Continued

14. For a detailed explanation of QE and how it affects financial markets, see Kazi and Macfarlane (2022).

37

Name

Dates
served on
MPC

Employed
before and/or
during MPC
membership

Employed
after MPC
membership

Silvana Tenreyro

2017 -✘

Current

Gertjan Vlieghe

2015 - 2021✔

✔

Andy Haldane2014 - 2021✘✘

Mark Carney2013 - 2020✔

✔

Brookfield AssetManagement;
Stripe; PIMCO;
Goldman Sachs

Ian McCafferty

2012 - 2018✔

✔

London Wall
Partners LLP;
Baring Securities;
Natwest Markets

Charlotte Hogg

2017 - 2017✔

✔

Visa Europe;
McKinsey &Company; Morgan
Stanley’ Goldfish
Bank; Experian
UK; Santander

Nemat (Minouche)
Shafik2014 - 2017✘✘

Kristin Forbes

2014 - 2017✔

✘

Martin Weale2010 - 2016✘✘

Adam Posen

2009 - 2012✔

✘

Deutsche BankDavid Miles2009 - 2015✔

✘

Morgan Stanley;
Merrill Lynch

Paul Fisher

2009 - 2014✘✘

Spencer Dale

2008 - 2014✘✘

Financial firm

Element
Capital; Brevan
Howard AssetManagement;
Deutsche Bank;
JPMorgan(Euroclear)

Morgan Stanley

Continued

38   The Power of Big Finance June 2022

Name

Dates
served on
MPC

Employed
before and/or
during MPC
membership

Employed
after MPC
membership

Andrew Sentance2006 - 2011✘✔

Tim Besley2006 - 2009✘✘David Blanchflower

2006 - 2009✘✘

Sir John Gieve

2006 - 2009✘✔

VocaLink; CLSGroup; Morgan
Stanley; GLG
Partners

David Walton

2005 - 2006✔

✘

Goldman Sachs

Rachel Lomax

2003 - 2008✘✔

HSBC Holdings

Richard Lambert

2003 - 2006✘✘

Sir Andrew Large

2002 - 2006✔

✔

Marshall Wace;
Axis Capital;
Orion Bank;
Swiss Bank
Corporation; UK
Stock Exchange;
Lloyd’s; Large,
Smith & Walter;
Euroclear;
Barclays plc

Paul Tucker

2002 - 2013✘✔

Swiss ReMarian Bell2002 - 2005✔

✔

Zurich Financial
Services; Alpha
Economics; RoyalBank of Scotland(RBS); Williams &Glyn’s Bank (partof RBS)

Kate Barker

2001 - 2010✔

✔

Yorkshire Building
Society; Credit
Suisse; Electra
Private Equity plc;
Man Group plc

Charles Bean

2000 - 2014✘✘

Financial firm

Conscience
Venture Capital;
PwC

Continued

39

Name

Dates
served on
MPC

Employed
before and/or
during MPC
membership

Employed
after MPC
membership

Stephen Nickell

2000 - 2006✘✘

Christopher
Allsopp2000 - 2003✘✘

Sushil Wadhwani

1999 - 2002✔

✔

Sir John Vickers

1998 - 2000✘✘

Sir Alan Budd

1997 - 1999✔

✔

Credit Suisse First
Boston; IG Group;
Barclays BankDavid Clementi

1997 - 2002✔

✔

WorldFirst; Ruffer
LLP; Virgin
Money; Prudential
plc; Kleinwort
Benson

DeAnne Julius

1997 - 2001✘✔

Jones Lang
LaSalle; Fathom
Financial
Consulting Ltd;
Lloyds Bank

Mervyn King

1997 - 2013✘✔

Citigroup

Ian Plenderleith

1997 - 2002✘✔

MorganStanley; BH
Macro; Sanlam;
BMCE BankInternational;
Europe Arab BankCharles Goodhart

1997 - 2000✘✔

Morgan Stanley

Willem Buiter1997 - 2000✘✔

Citigroup;
Goldman Sachs
International

Financial firm

QMA Wadhwani;
Wadhwani AssetManagement;
CaxtonAssociates;
Goldman Sachs;
Tudor Investment
Corporation

Continued

40 The Power of Big Finance June 2022

Name

Dates
served on
MPC

Employed
before and/or
during MPC
membership

Employed
after MPC
membership

Howard Davies

1997 - 1997✔

✔

Inigo Ltd; Natwest
Group; Prudential
plc; MillenniumManagement
LLC; Phoenix
Group; Morgan
Stanley; McKinsey& Company;
National
Westminster Bank
(Natwest)

Sir Edward George

1997 - 2003✘✔

N M Rothschild &Sons Ltd

Financial firm

Source: Bank of England Annual Reports and Accounts from 1997-2021.

3.2.2. Financial Policy Committee
The establishment of the Financial Policy Committee (FPC) was announced in 2010, with the firstmeeting of the Interim FPC in June 2011. Its primary function is to maintain financial stability bymonitoring the UK economy to identify systemic risks. The FPC was officially established in 2013,and has since had 30 members in total, including interim members.
Of the 12 current members of the FPC, seven (58.3%) have previously worked at private
financial companies, including two who still do.15 This is slightly below the average of the total
FPC members, with 21 (70%) having worked in private finance at some point in their career.
Amongst the 18 former members, 50% went on to work in private finance after working at the Bankof England (27.8% had not worked in private finance previously), leaving this committee exposed to
all the risks discussed thus far: cognitive capture from having previously worked in private finance,
acting favourably towards the sector because of future career prospects, and conflicts of interest
arising for sitting members who remain stakeholders in the sector they regulate.

15. Charles Roxburgh was excluded from the data, because as a Treasury representative, he does not have voting power on the       committee.
41

Table 9: Positions held in private finance by Financial Policy Committee members, 2011-2022.

Name

Dates
served on
FPC

Employed
before and/or during FPC
membership

Employed
after FPC
membership

Andrew Bailey

2016 -✘

Current

Colette Bowe

2019 -✔

Current

Sarah Breeden

2021 -✘

Current

Ben Broadbent

2014 -✔

Current

Sir Jon Cunliffe

2013 -✘

Current

Jonathan Hall

2020 -✔

Current

Anil Kashyap2016 -✘

Current

Sir Dave Ramsden

2017 -✘

Current

Nikhil Rathi

2020 -✔

Current

London Stock
Exchange (LSE)
plc

Elisabeth
Stheeman2018 -✔

Current

Edinburgh
Investment
Trust Plc
(current); AsianInfrastructure
Investment Bank
(current); Aareal
Bank AG (current)

Carolyn Wilkins

2021 -✔

Current

Intact Financial
Corporation(current)

Financial firmElectra Private
Equity plc;
Morgan Stanley;
Goldfish Bank;
Axa Investment
Managers;
Yorkshire Building
Society

Goldman Sachs

Eisler Capital;
Goldman Sachs;
Credit Suisse
Financial ProductsContinued
42 The Power of Big Finance June 2022

Name

Dates
served on
FPC

Employed
before and/or during FPC
membership

Employed
after FPC
membership

Financial firm

Sam Woods

2016 -✔

Current

McKinsey & Co.

Alex Brazier

2015 - 2021✘✔

BlackRock

Donald Kohn

2013 - 2021✔

✘

AlliancePartners

Christopher
Woolard2020 - 2020✘✘

Mark Carney2013 - 2020✔

✔

Brookfield AssetManagement;
Stripe; PIMCO;
Goldman Sachs

Martin Taylor

2013 - 2020✔

✘

Oxford Investment
Partners (OXIP);
Goldman Sachs;
Barclays

Richard Sharp

2013 - 2019✔

✘

SW7 Asset
Management (UK)
LLP; RoundshieldPartners LLP;DII Capital UK
Adviser LLP;Goldman Sachs;
JPMorgan

Dame Clara Furse

2013 - 2016✔

✔

HSBC UK;
Nomura Holdings
Inc.; Legal &General Groupplc; Nomura
Europe’s FSA
regulated entities;
Fortis SA;
Euroclear SA;
LCH Clearnet SA;
LIFFE; London
Stock ExchangeGroup; Credit
Lyonnais Rouse;
UBS; Dean
Witter Reynolds
Overseas Ltd
Continued

43

Name

Dates
served on
FPC

Employed
before and/or during FPC
membership

Employed
after FPC
membership

Tracey McDermott2015 - 2016✘✔

Standard
Chartered

Martin Wheatley2012 - 2015✘✔

Jigsaw XYZ; Oasis
Management

Charles Bean

2011 - 2013✘✘

Andy Haldane

2011 - 2013✘✘

Mervyn King2011 - 2013✘✔

Citigroup

Paul Tucker

2011 - 2013✘✔

Swiss Re

Alastair Clark

2011 - 2013

✔

✘

LIFFE
Administrationand Management

Michael Cohrs

2011 - 2013✔

✘

EQT; Goldman
Sachs; S.G.
Warburg & Co
Ltd; Deutsche
Bank AGPaul Fisher

2011 - 2013✘✘

Robert Jenkins

2011 - 2013✔

✔

Financial firm

Wallmine; NN
Group; Citigroup;
CVC Capital;
Combinatorics
Capital, LLC.;
F&C Asset
Management, plc.;
Foreign & Colonial
Management
Limited; Credit
Suisse AssetManagement
Holding; Credit
Suisse Investment
Management
Group Ltd.;
Credit Suisse;
Aberdeen All Asia
Investment TrustContinued

44 The Power of Big Finance June 2022

Name

Dates
served on
FPC

Employed
before and/or during FPC
membership

Employed
after FPC
membership

Adair Turner

2011 - 2013✔

✔

Financial firm

Chubb Europe;
Chase Manhattan
Bank; McKinsey &Co.; Merrill Lynch
Europe; Standard
Chartered plc

Source: Bank of England Annual Reports and Accounts from 1997-2021.

3.2.3. Prudential Regulation Committee
The Prudential Regulation Authority (PRA) was created by the Financial Services Act 2012, alongside
the FPC, with these two regulators formally replacing the now defunct Financial Services Authority(FSA). The regulatory decisions previously taken by the board of the FSA are now exercised throughthe Prudential Regulation Committee (PRC). Those decisions involve acting to counter any risks
identified by the FPC. More broadly, the PRA’s primary function is the supervision of all financial
companies in the UK, from banks to insurers to credit unions.
There have been 24 members of the PRC (and PRA board) since the PRA’s formation,
17 (70.8%) of whom have worked at private financial companies. A similar division can beobserved in the current membership, with seven of the 11 sitting PRC members (63.6%) having a
background in the private financial sector. Two of the 11 current members still hold positions at
private financial institutions.
The Treasury is presently considering whether or not to grant a secondary regulatory objective to the
PRC that would require it to support the international competitiveness of regulated firms within its
rulemaking. It is therefore of particular significance that the PRC is exposed to conflicts of interests
amongst its current membership. Already widely criticised by civil society for risking a ‘light-touch’approach from regulators (Finance Innovation Lab et al., 2022), the proposed objective is especiallyconcerning when being granted to the decision-making committee with the greatest exposure to theinterests of private financial firms (Positive Money, 2022).

45

Table 10: Positions held in private finance by Prudential Regulation Committee members/Prudential
Regulation Authority board members 2013-2022.

Name

Dates
served on
PRA/PRC

Employed
before and/or during
PRA/PRCmembership

Employed
after PRA/PRC
membership

Andrew Bailey

2013 -✘

Current

Julia Black2018 -✘

Current

Ben Broadbent

2014 -✔

Current

Goldman Sachs

Tanya Castell

2021 -✔

Current

Handelsbanken
Plc; Standard
Life Savings Ltd;
Faster Payments
Scheme Ltd;
Societe Generale
International;
Multrees Investor
Services Ltd; UBS(UK) Pension andLife Assurance
Scheme; HBOSGroup Money
Purchase
Scheme; Lloyds
Banking Group;
UBS AG; JPMorganSir Jon Cunliffe

2013 -✘

Current

Antony Jenkins

2021 -✔

Current

Financial firm

Fannie Mae(current);
Blockchain(current);
Currencies
Direct (current);
Palamon CapitalPartners (current);
Barclays;
Citigroup;
Barclaycard; Visa
EuropeContinued

46 The Power of Big Finance June 2022

Name

Dates
served on
PRA/PRC

Employed
before and/or during
PRA/PRCmembership

Employed
after PRA/PRC
membership

Jill May

2018 -✔

Current

S.G.Warburg &Co.Ltd; UBS;
Ruffer Investment
Company(current);
JPMorgan
Claverhouse(current);
Standard Life
Investments
Property Income
Trust (current)

Nikhil Rathi

2020 -✔

Current

London Stock
Exchange (LSE)plc

Sir Dave Ramsden

2017 -✘

Current

John Taylor

2021 -✔

Current

Lloyds Banking
Group; Scottish
Widows; Standard
LifeSam Woods

2016 -✔

Current

McKinsey & Co.

Norval Bryson

2015 - 2021✔

✘

Scottish Widows
Group; TSB Bank
Ltd; Scottish
Provident
Institution (nowRoyal London);Aberdeen AssetManagement

David Belsham

2015 - 2021✔

✘

Prudential plc

Mark Yallop

2014 - 2020✔

✘

UBS; ICAP;
Deutsche Bank

Christopher
Woolard2020 - 2020✘✘

Financial firm

Continued

47

Datesserved on
PRA/PRC

Employed
before and/or during
PRA/PRCmembership

Employed
after PRA/PRC
membership

Sandra (Sandy)
Boss2014 - 2020✔

✔

BlackRock; Enstar
Group; McKinsey& Co.; McKinsey
Master Retirement
Trust; Merrill
Lynch & Co.

Mark Carney2013 - 2020✔

✔

Brookfield AssetManagement;
Stripe; PIMCO;
Goldman Sachs

Charles Randell2013 - 2018✘✘

David Thorburn2015 - 2018✔

✔

Nemat (Minouche)
Shafik2014 - 2017✘✘

Iain Cornish

2013 - 2015✔

✔

Leeds Building
Society;
Shawbrook
Bank; Yorkshire
Building Society;
St James’s
Place plc; Arrow
Global Group plc;
Vanquis Bank

Martin Wheatley2012 - 2015✘✔

Jigsaw
XYZ; Oasis
Management

Name

Financial firm

Barclays Bank UK
plc; Clydesdale
Bank & Yorkshire
Bank; Trustee
Savings Bank(TSB)Continued

48   The Power of Big Finance June 2022

Name

Dates
served on
PRA/PRC

Employed
before and/or during
PRA/PRCmembership

Employed
after PRA/PRC
membership

Rosalind Gilmore

2013 - 2014✔

✘

Zurich InsuranceGroup; Lloyd’s ofLondonNick Prettejohn

2013 - 2014✔

✔

TSB Bank plc;
Lloyds Banking
Group; Scottish
Widows Group;
Lloyd’s of London;
Prudential UK& Europe; Brit
Insurance; Legaland General plc

Financial firm

Source: Bank of England Annual Reports and Accounts from 1997-2021.

49

4. Narratives
Following the financial crisis, public trust in financial institutions plummeted         (YouGov-Cambridge, 2013). Ten years on, a YouGov poll commissioned by Positive
Money found that two thirds of Britons still did not trust banks to work in the public
interest (White, 2018). But financial institutions and their allies in government
are seeking to reinvent the sector’s image by presenting it as the ‘engine of theeconomy’, a supportive ally to ordinary people during the pandemic, and a solution toenvironmental breakdown. These deceptive narratives distract from the reality of an
oversized financial sector prioritising its own growth and profits over the interests ofpeople and planet.
4.1. Supporting the ‘real economy’
The financial sector’s dominant narrative over the past decade has emphasised its contribution tothe ‘real economy’, boosting economic growth and providing employment and tax revenue. Private
finance’s interests are thereby portrayed as not only consistent with, but crucial to, the interests ofthe public. This narrative has been increasingly deployed to contest tighter regulatory constraints
on financial firms, claiming that such regulation would negatively impact ordinary businesses andhouseholds (James et al, 2021).
The ‘supporting the real economy’ narrative persists today, featuring prominently in the current postBrexit deregulatory agenda. For example, in its recent response to the Treasury’s consultation on
the future regulatory framework for financial services, UK Finance claims that “the contribution of thebanking and finance sector to the prosperity of the UK is more vital than ever” (UK Finance, 2022).
Meanwhile, The City UK, which was set up by the government in 2010, publishes an annual report
titled “Key facts about the UK as an international financial centre”, which attempts to lay out how
crucial the UK’s large financial sector is to its economy (TheCityUK, 2021). In its landmark publication“A new chapter for Financial Services”, the Treasury describes the financial sector as “the engine of
our economy, a driving force of global markets, and critical to the creation of sustainable growth athome and abroad” (HM Treasury, 2021a).
In reality, describing the finance sector as vital to the UK’s prosperity and ‘the engine of our economy’masks the reality of the so-called ‘finance curse’. A significant body of empirical research showsthat beyond a certain point, further growth of the financial sector hampers rather than supports thereal economy (Tax Justice Network, 2020). One study estimates that the excessive size of the UK’s
financial sector may have cost the economy £4.5 trillion in lost growth between 1995 and 2015
(Baker et al, 2018).

50 The Power of Big Finance June 2022

Box 8: Estimates of the financial sector’s contribution to total economic output are
methodologically flawed
According to ONS data, the financial sector’s contribution to total UK economic output,
measured in terms of gross value added (GVA), peaked at 9.1% in 2009, and has remained
between 8% and 9% ever since (Hutton and Shalchi, 2021). Financial lobbyists often highlightsuch figures in an attempt to convey the economic value of the sector to policymakers and the
public. TheCityUK, for example, describes itself as “the industry-led body representing UKbased financial and related professional services, an industry that contributes over 10% of the
UK’s total economic output” (TheCityUK, 2022).
However, as argued by former BoE Chief Economist Andy Haldane and his colleague Vasileios
Madouros, “it seems likely that the value of financial intermediation services is significantly
overstated”, for two main reasons (Haldane and Madouros, 2011). First, in the current
methodology, high levels of dangerous risk-taking inflate banks’ estimated economic output,
which is why the financial sector’s official contribution to GVA perversely peaked in 2009, rightafter the onset of the global financial crisis. Researchers from the European Central Bank
found that adjusting the existing methodology to eliminate the positive contribution of excessiverisk-taking resulted in Euro area bank output being 24 – 40% lower than official figures(Colangelo and Inklaar, 2010). While the ONS has since explored this issue (Akritidis, 2017),    
it has not yet implemented any methodological adjustments to resolve it.
The second main reason that existing statistical measures of output overestimate the financial
sector’s output is that they fail to take into account the enormous cost of government support
to the banking sector, as well as lost output resulting from financial crises that originate fromhigh risk activity within the sector. Haldane and Madouros (2011) specifically emphasise theimportance of implicit subsidies on top of explicit bail-outs, explaining that banks’ too big to failstatus (see section 5) results in an implicit guarantee that governments will rescue them fromdefault. This government backing allows banks to borrow much more cheaply from lenders,
and therefore make larger profits. Haldane (2011) estimated that the five largest UK banks
benefited from a ‘too big to fail’ subsidy of approximately £50 billion a year between 2007      and 2009.
More fundamentally, it is important to consider that overestimating the financial sector’s output
is only one of many methodological concerns related to measures of total economic output.
A previous Positive Money report, ‘The Tragedy of Growth’, showed that endless GDP growth
is a harmful policy goal, and argued that GDP’s dominance in policymaking should be replaced
by a dashboard of social and economic indicators (Barmes and Boait, 2020). Therefore, even
if the ONS does improve its methodology for estimating the financial sector’s contribution toeconomic output, policymakers should not be guided by such figures, but rather recognise thatgrowth in aggregate economic output is no solution to society’s biggest challenges.

51

The UK financial sector’s disproportionate lending to finance, insurance, and real estate sectors      (see figure 9) is a key way in which it acts as an ‘engine’ of asset price inflation and rising inequality,
rather than of the wider economy (Kazi and Macfarlane, 2022).
Figure 9: Bank lending allocation in the UK.
3,000

General government
Unincorporated businesses
and non-profits

Private non-financial corporations
Financial sector

2021

2016

2011

2006

2001

1986

-

1996

1,000

1991

£ Millions

2,000

Consumer credit
Mortgages

Note: Quarterly amounts outstanding of resident financial institutions’ sterling and all foreign currency net lending (in £ millions) notseasonally adjusted.
Source: Kazi and Macfarlane (2022), based on data from the Bank of England Interactive Database.

Financial institutions’ record of legal infringements is another prime example of how their own
interests and behaviours are inconsistent with the interests of ordinary businesses and households.
Financial firms are the biggest repeat offenders of corporate crimes, stacking up fines totaling          £4.9 billion since 2010, far higher than any other sector (see figure 10). These offences have involved
failures to conduct adequate due diligence related to money laundering and other types of financial
crime, unfair handling of mortgage customers in payment difficulties or arrears, manipulation ofinterbank lending rates at the expense of customers, and insider trading. A continuous stream of newbanking scandals reported by the media suggests that the available data on legal violations may only
scratch the surface of finance’s misconduct (Shields and Murphy, 2022).

52 The Power of Big Finance June 2022

In addition to those violations for which fines have been issued, there have also been numerous
cases in recent years where regulators have failed to act against serious wrongdoing. The FCA
has frequently been branded ‘toothless’ by MPs and campaigners due to its repeated failures totake enforcement action against the firms it regulates, such as in the case of the Connaught andWoodford fund scandals, which left hundreds of thousands of ordinary savers, as well as local
authorities, facing significant losses (Selby, 2016; White, 2021). Other notable examples include
the Global Restructuring Group scandal, in which RBS (now NatWest) pushed thousands of small
businesses into bankruptcy and stripped them of their assets between 2008 and 2013. Though the
FCA had previously found that RBS had mistreated more than 90% of GRG customers, it finallydecided in 2019 to take no action, concluding that “its powers to discipline for misconduct do not
apply and that an action in relation to senior management for lack of fitness and propriety would nothave reasonable prospects of success.” (FCA, 2019). It later emerged that the chief executive of
the FCA at the time, current Bank of England governor Andrew Bailey, was himself involved in a key
element of the GRG scandal, a potential conflict of interest he failed to declare (Hurley, 2021).  
The FCA’s repeated failings illustrate how the influence of private finance leads to an environment
where regulators are making decisions in the interest of firms rather than consumers. In response to
the FCA’s failure to regulate the collapsed London Capital and Finance fund, the Treasury Committee
has called for a change of culture to ensure the regulator is willing to act to protect consumers(Treasury Committee, 2021a).
Figure 10: Total value of fines issued to the top 10 most heavily fined sectors in the UK.

Financial services
Aerospace & military
Telecommunications
Utilities & power generation
Diversified companies
Pharmaceuticals
Miscellaneous manufacturing
RetailAirlines
Oilfield services & supplies
0

1

2

3

4

5

Billions (GBP)
Source: Good Jobs First and Transparency Task Force Violations Tracker UK.

53

4.2. Providing a COVID-19 lifeline
Throughout the pandemic, UK Finance issued dozens of press releases emphasising the“unprecedented support” they provided to struggling customers (UK Finance, 2020). The narrativethat private finance prioritised struggling customers has been embraced wholeheartedly by theTreasury, claiming that “[t]he benefit of a vibrant financial services sector was clearly demonstrated in
the economic response to the pandemic. The sector worked with the government and the regulators
to keep branches open for those who needed them, offered payment holidays for those in financial
difficulty and provided loans to businesses in need” (HM Treasury, 2021a).
This is a deeply misleading depiction of financial institutions’ general response to the pandemic.
Stating that they were keeping branches open masks the steady long-term decline of bank branches
due to closures. According to ONS data displayed in figure 11, the number of branches in the UK fellby 34% between 2012 and 2021, and according to Which? (2022), the number of UK bank branches
has fallen by nearly half (48%) since 2015, with banks closing 4,911 branches across the country —a rate of around 54 a month. While there was a brief slowdown in branch closures at the beginningof the pandemic, banks and building societies still shut down 369 branches in 2020 and over 736 in
2021. The FCA issued a statement in January 2021 asking banks to reconsider planned closures dueto their negative impact on customers, but banks such as HSBC and Lloyds continued to announce
further branch closures (FCA, 2021; Morris 2022).
Meanwhile, between July 2018 and July 2021, close to 13,000 ATMs were taken out of service,amounting to a 20% decrease in the total stock of ATMs across the UK, jeopardising customers’
access to cash (Shalchi and Booth, 2022). A driving cause behind the disappearance of free ATMs
has been LINK cutting the interchange fee, the charge which funds such ATMs, a decision ultimately
driven by the commercial interests of banks and card companies (Positive Money, 2020).
Figure 11: Total number of bank and building society branches in the UK.
15,000Branches

10,000

5,000

0
2012

2014

Source: ONS data compiled by house of Commons Library, Link.

54 The Power of Big Finance June 2022

2016

2018

2020

Figure 12: Total number of free to use ATMs in the UK.

Free ATMs

60,00040,00020,000

0
2012

2014

2016

2018

2020

Source: ONS data compiled by house of Commons Library, Link.

In addition, banks’ implementation of Covid emergency lending schemes was fraught with problems.
In the initial stages of the schemes, banks charged excessively high interest rates, requested
personal guarantees on loans that were already 80% backed by the government, and rejected
thousands of loan applications (Adler, 2020). In response, Rishi Sunak increased the government’s
guarantee to 100% for the Bounce Back Loan Scheme (BBLS), offering loans of up to £50,000
to small and medium-sized businesses. The Treasury still allowed banks to charge 2.5% interest
on loans without taking on any of the risk (Youel, 2020). This is despite the fact that for the Swiss
scheme the BBLS was modelled on, government-guaranteed loans were interest free up to 500,000
Swiss Francs (£409,630), with interest on loans above that amount limited to 0.5% (The Federal
Council, 2020).
It’s also worth noting that banks have failed to provide adequate support or compensation to victims
of fraud during the pandemic (Brignall, 2021). Authorised push payment fraud, where scammers
trick individuals into sending them money, rose particularly sharply during the pandemic, and thenumber of complaints to the Financial Ombudsman Service (FOS) about banks’ mishandling thesecases doubled in the 2020-2021 financial year. The FOS has ruled against banks in 73% of cases,
judging that they treated customers unfairly and requiring them to reimburse victims’ funds. While it’s
positive that the FOS is upholding customers’ complaints, banks’ negligence in the first place has left
fraud victims waiting for life-altering sums of money for months on end (Cavaglieri, 2021). During theheight of the pandemic NatWest customers also saw their current accounts suddenly closed without
explanation, leaving many without a means to make payments (Prestridge, 2020).

55

More broadly, while ordinary households have struggled enormously throughout the COVID-19
pandemic, banks have, in effect, been implicitly bailed out by the government. A report by the Institutefor Public Policy Research (IPPR) estimated that 32% of furlough money flowed directly to banks
via loan repayments (Berry et al, 2020). This amounts to a total of just over £22 billion throughout
the lifespan of the furlough scheme. Furthermore, given the design of Covid loan schemes, thegovernment will compensate banks for 80%-100% of defaulted loans while businesses will be left
to fail. In March 2021, the Business, Energy and Industrial Strategy department estimated that the
government would be on the hook for £17 billion due to defaults and fraud under the Bounce Back
Loan scheme alone (NAO, 2021).
As low-income families are further squeezed by the cost of living crisis, banks have raked inconsiderable profits (Treanor, 2022), handed out record bonuses to their employees and are set
to receive a tax cut on profits in 2023 (Neate, 2022; Partington, 2021). In sum, banks’ behaviour
throughout the pandemic has fallen short of genuine support for the real economy, and has echoed
the failures of the 2008 global financial crisis by privatising profit and socialising risk.

4.3. Tackling climate change
The ‘opportunities’ that green finance presents is an increasingly hot topic in private finance. Rishi
Sunak wants to position the City of London “at the forefront of green finance” and make the UK a‘world-leader’ in this field (HM Treasury, 2020). At COP26, Sunak’s speech highlighted Mark Carney’s
Glasgow Financial Alliance for Net-Zero (GFANZ), a voluntary alliance of 450 financial institutions
with net-zero targets. As these institutions are worth over $130 trillion, Sunak claimed “[t]his is an
historical wall of capital for the net zero transition around the world.” (HM Treasury, 2021c).
The financial system certainly has a major role to play in tackling climate change, but large financial
institutions are currently a far bigger part of the problem than the solution. Since the Paris Agreement,
the world’s 60 biggest banks funnelled $4.6 trillion into fossil fuels, and in 2019 alone, 50 banks
invested $2.6 trillion into activities that are primary drivers of biodiversity destruction (Banking on
Climate Chaos 2022; Portfolio Earth, 2022). Members of the Net Zero Banking Alliance — thebanking wing of Carney’s GFANZ — have continued to finance companies expanding upstream
oil and gas expansion to the tune of at least $38 billion since the alliance was formed just a year
ago. This behaviour is ongoing despite the International Energy Agency’s recommendation that
there should be no further expansion of oil and gas fields if the world is to reach net-zero by 2050             (Lerin et al, 2022).
Institutional investors are also guilty of driving the climate crisis. Recent research found that “4,408
institutional investors held investments totalling US$1.03 trillion in companies operating along thethermal coal value chain” (Reclaim Finance, 2021). Vanguard and Blackrock — also members of
GFANZ — lead the rankings with $86 billion and $84 billion invested in the coal industry respectively.
Furthermore, a study of 723 equity funds found that 71% of Environmental, Social, and Governance(ESG) labelled investment funds and 55% of specifically ‘climate-themed’ funds are not alignedwith Paris Agreement goals (InfluenceMap, 2021). Similarly, a UK-focused study found that athird of climate-themed funds registered for sale hold shares in oil and gas producing companies(Buller, 2020).

56 The Power of Big Finance June 2022

Regulatory initiatives intended to improve standards and minimise greenwashing have at times been
so watered down that they’ve ended up exacerbating it. For example, following the introduction of
the EU’s sustainability disclosure requirements in March 2021, data provider Morningstar found thatbetween June and September, the European sustainable fund universe expanded by 65%, reachinga total of 6,147 funds. But following an extensive review of funds, it found that fund managers selfreported their funds as being ‘sustainable’ without having adequate credentials to back-up theseclaims, and it therefore took the decision to cut 1,200 funds from its ‘European sustainable’ list
(Quinio, 2022).
The next step towards creating a financial sector that is truly aligned with environmental goals is
recognising the extent to which the sector is currently part of the problem.

57

5. Economic Dependence
While the financial sector is not sufficiently serving the public interest or helping totackle climate change (as shown in section 4), this section describes how economic
activity is nonetheless dependent on a stable financial system, and how financial
institutions derive political power from this dependence.
Economic transactions rely on commercial banks for access to credit and payments systems.
Credit is, alongside the labour and natural resources it employs, the lifeblood of economic activity,
and the ability to make payments is essential to individuals’ and firms’ participation in society. Asbank deposits are the main form of money circulating in the economy, a banking crisis can bring
down the payments systems we all depend on in daily life. This dependence provides commercial
banks with ‘structural’ power, meaning that policymakers’ decisions often align with their interests
regardless of lobbying efforts. Banks and other large financial firms are granted special protections
and advantages over firms in other economic sectors, including the provision of deposit insurance,
exclusive access to the Bank of England’s accounts and settlements systems, and — in the event ofa financial crisis — bailouts from the government, which are ultimately paid for with public funds.
Our dependence on commercial banks is made particularly problematic by the oligopolistic structureof the banking sector. Over the past three decades, a small number of banks have grown massively
in size and have become increasingly interconnected. As shown in figure 13, the three largest UK
banks currently account for over 50% of total banking assets, while the largest five banks account for
close to 70%. The New Economics Foundation’s Financial System Resilience Index judges the UK’s
financial system to be by far the least resilient financial system in the G7 (Macfarlane, 2016).

58   The Power of Big Finance June 2022

Figure 13: Bank concentration in the UK.

% of total banking assets

100

75

50

25

0

2000

2005

2010

3 bank asset concentration

2015

2020

5 bank asset concentration

Note: ‘3 bank asset concentration’ refers to the combined value (in £ sterling) of the assets held by the 3 largest UK banks. ‘5 bank asset
concentration’ refers to the combined value of assets held by the 5 largest UK banks. Both are shown as a proportion of total banking
assets held in the UK.
Source: World Bank Global Financial Development Database.

If a systemically important bank fails, the impact can rapidly spread across the entire financial systemand have devastating consequences for the real economy, as demonstrated by the collapse of
Lehman Brothers in 2008. The subsequent realisation that banks had effectively become ‘too big
to fail’ resulted in fiscal authorities providing bank bailouts and government guarantees, and a newera of unconventional monetary policy pumping liquidity into financial markets, in an all-out effort torestore financial stability.

Box 9: Did Brexit display the limits of the political power of finance?
According to many analysts, Brexit displayed the limits of the political power of finance, giventhat the City was unable to achieve its majority preference for remaining in the EU (Thompson,
2017; James and Quaglia, 2018) - a political loss that could result in the exodus of financial
services from London to financial centres in the EU, such as Paris and Frankfurt. However, thisassessment underestimates the extent to which the EU is dependent on London’s financial
infrastructure, and the political power that flows from this economic dependence.

59Despite the EU’s initial resistance to providing special treatment for any one of the ‘four
freedoms’ of the single market - freedom of goods, services, capital, and labour - it ended up
carving out unique protections for the financial sector. Recognition of the EU’s dependence
on London’s deep and liquid financial markets, related professional services, and physicalinfrastructure, resulted in a wide range of contingency agreements being established to protect
finance in the event of a no-deal Brexit (Kalaitzake, 2021a). For example, in December 2018
the EU Commission granted full equivalence to UK central counterparty clearing firms (CCPs),
which facilitate trading in derivatives and equities markets, for a period of one year. Thisagreement has been repeatedly extended ever since, with the latest extension running until
June 2025 (European Commission, 2022).
For largely the same reasons that EU policymakers have offered special treatment to the Cityof London, UK financial institutions have not emigrated to the EU. In fact, the UK financial
sector employs more people currently than it did prior to the referendum, and recruitment
is booming (Barnett, 2022). The City also continues to attract high levels of foreign direct
investment, fintech funding and new firms, and has “increased its dominance in major
infrastructure markets such as over-the-counter clearing of (euro-denominated) derivatives
and foreign exchange” (Kalaitzake, 2021b). On the other hand, London now handles fewer
repurchase agreements and was temporarily overtaken by Amsterdam as the largest hub forshares trading, although the latter was short-lived and relatively economically insignificant
while it lasted. Overall, the UK has firmly maintained its competitive advantage over the EU infinancial services. Policymakers are now seeking to use the process of replacing EU regulation
after Brexit to further increase the ‘international competitiveness’ of the City, despite opposition
from civil society (Finance Innovation Lab et al., 2022).
Overall, the EU’s deep dependence on the City of London, and how this influenced Brexit
negotiations, displays the strength rather than the limits of the City’s structural power.

On top of the economy’s structural dependence on ‘too big to fail’ banking, political power also arises
from policymakers’ dependence on finance for the implementation of certain economic policies.
Braun (2018) refers to this as ‘infrastructural power’, which “stems from entanglements between
specific financial markets and public-sector actors, such as treasuries and central banks, whichgovern by transacting in those markets” (Braun, 2020). He argues that in becoming ‘participants’in financial markets, for example by buying and selling government bonds, policymakers become
more likely to align with the interests of those markets. In their response to the COVID-19
pandemic, central banks around the world became more active than ever in financial markets                         (Cantú et al., 2021).
Gabor (2021) argues that this type of financial power is being extended beyond monetary and fiscal
policy into other areas of public policy, as the state seeks to involve and ultimately rely on private
finance to “fund and operate its physical and social infrastructure” (emphasis in original) related tohousing, health, nature and more.

60 The Power of Big Finance June 2022

6. Recommendations
6.1. Tackling conflicts of interest, lobbying, and the revolving door
Recommendation 1: Strengthen standards for the registration of interests for MPs, peers, andministers by updating the Members’ Code of Conduct and Ministerial Code.
Trust in politics has sharply declined in recent years: in 2014 just under half of British people saw
politicians as ‘out for themselves’, with this figure rising to two thirds of people in 2021 (IPPR, 2021).
In order to address conflicts of interest stemming from financial ties between public officials and theprivate sector, and restore trust in democracy, improved transparency is a necessary prerequisite.
Currently, disclosure requirements in the Members’ Code of Conduct suffer from multiple gaps.       For example, MPs are not required to disclose shareholdings under £70,000 unless their investment
represents 15% of the company’s issued share capital (UK Parliament, 2015). Therefore, an MP
could hold hundreds of thousands, if not millions, of pounds worth of shares in a sector of theeconomy, yet face no obligation to disclose this interest as long as they split their investments
across multiple different companies. The Register of Lords’ interests is even less transparent,                         as peers are not required to report the value of interests they hold or their salaries for paid positions.
These disclosure gaps must urgently be filled, providing the public with a comprehensive picture ofparliamentarians’ interests, and deterring parliamentarians from accumulating conflicts of interest in
the first place.
Furthermore, Ministers are not required to register gifts, benefits or hospitality received in theircapacity as Ministers in the MPs’ Register of Financial Interests. Instead, they are required by
the Ministerial Code (set by the Prime Minister) to disclose gifts and hospitality in departmental
disclosures, which are published on a quarterly basis. Other interests relevant to their ministerial
duties are published only once or twice a year in a list of Ministers’ interests (Cabinet Office, 2021).
In comparison, the MP’s Register of Financial Interests is updated on a monthly basis. Therefore,
Ministers — who likely receive most of their gifts, benefits and hospitality in their capacity as
Ministers, rather than as MPs — are subject to a lower standard of transparency than non-ministers,
given that their interests are published in a far less timely manner.
The House of Commons Committee on Standards has recognised that it “is manifestly inappropriate
for Ministers to be subject to fewer and less onerous standards of registration of financial interests
than Members who are not Ministers” and is considering recommending that ministerial interests bedisclosed on the MPs’ register (House of Commons Committee on Standards, 2021). We agree that
ministerial interests should form part of the Register of Members’ Financial Interests, so that all MPs’interests can easily be found in one place, and ministers’ standards of registration are brought in linewith those of the rest of the House.

61Recommendation 2: Ban second jobs for MPs except for public service roles, and cap theamount they can be paid for speeches.
Following media scrutiny of MPs’ second jobs (triggered by the Owen Paterson lobbying scandal —see box 3 in section 2), the proposal for a ban on second jobs received a groundswell of support, with
77% of people now thinking it’s unacceptable for MPs to be employed to give advice to companies
lobbying parliament (YouGov, 2021). Our findings show that throughout 2020 and 2021, MPsreceived a total of £2.3 million from the financial sector, in the form of payments for second jobs andspeeches, as well as donations, gifts, and hospitality. These benefits were all accrued while crucial
financial services legislation, such as the Financial Services Act 2021, was going through Parliament,
further underscoring the need for a ban on second jobs. However, some exceptions should be madefor public service roles, such as doctors, nurses, teachers, and firefighters.
In November 2021, the House of Commons voted in favour of a motion to ban MPs from accepting
second jobs specifically as parliamentary advisors or consultants (Hughes and Parker, 2021). While
this is a small step in the right direction, it falls far short of the wider ban needed to prevent serious
conflicts of interest arising between MPs’ duty to serve their constituents and their personal interestsin the private sector.
Polling data shows longstanding public support for a more wide-reaching ban on second jobs. In
2015, a YouGov poll found that 54% supported a full ban on MPs taking second jobs, while only 28%
opposed the ban (Shakespeare, 2015). More recently, an Ipsos poll conducted in 2021 found that
only 19% of Britons approve overall of MPs holding second jobs. There was also significant variationin responses depending on the specific job: while 52% said they would approve of an MP working
as a doctor for the NHS, only 15% would approve of an MP working as a paid advisor to a bank or afinancial services organisation (Pedley and Garrett, 2021).
In addition to earnings from second jobs, certain MPs are also receiving disproportionately large
sums of money for giving speeches. Theresa May, for example, has earned £1.86 million fromspeeches since leaving office as Prime Minister (Dyer, 2021). Therefore, we also recommend thatpayments for speeches be restricted to only cover expenses, preventing MPs from receiving large
sums of money in the form of speaker fees, which may give rise to conflicts of interest.
We do not propose a ban on private sector jobs for peers, given that they are not full-time salaried
public officials. However, our research shows significant potential conflicts of interest in the Houseof Lords, including 60% of peers currently sitting on the Economic Affairs Committee having paidinterests in the financial sector. Once peers’ earnings are disclosed in the Lords’ register of interests(see recommendation 1), it will be easier to determine the severity of such conflicts of interest, andevaluate whether a cap on earnings or a ban on certain types of employment would be proportionate
measures to prevent such conflicts of interest arising.

62 The Power of Big Finance June 2022

Recommendation 3: Cap political party donations and require All-Party Parliamentary Groups(APPGs) to disclose funding sources.
Section 1.2. shows that our political parties are heavily reliant on donations from financial institutions
and individuals closely tied to the financial sector. This is one of the many reasons presented in thisreport that the government is unlikely to move towards financial policymaking in line with the public
interest. The record of major donors securing political access, influence, and peerages is one of thestrongest indications that campaign funding and spending rules are in need of reforms.
In 2011, the CSPL released a report titled ‘Political Party Finance: Ending the big donor culture’,arguing that the current rules were “unsustainable, damaging to confidence in democracy and inserious need of reform”. They went on to explain that “this was also the view expressed by the threemajor parties at the last elections” and “all three made commitments in their manifestos to reform thebig donor culture”. CSPL concluded that “the only safe way to remove big money from party funding
is to put a cap on donations, set at £10,000.” They considered that this would necessarily entail anincrease in public funding of political campaigning, though at a relatively small cost relative to othermeasures aimed at protecting democracy.
Over a decade on, political party fundraising models are still based on securing large donations froma small number of wealthy individuals. In a more recent CSPL report on Election Finance, publishedin July 2021, the Committee made a number of well-reasoned recommendations (such as requiring
individuals to be on a UK electoral register to be permissible donors), but it omitted any cap on
donations. When questioned about this omission, the Chair of the Committee Lord Jonathan Evansstated there was a lack of “political will or public appetite for major reform of party finance”, despite
accepting that there was clear need for reform to prevent “undue access and influence given todonors” (Evans, 2021). However, evidence from the British Election Study survey shows that 82%
of people in 2016 see the issue of party funding of “some ‘’ or “great importance” (Goddard, 2016).
Voters feel disillusioned with the voices of wealthy donors mattering more than theirs: comparedto the 6% of voters who believe their views are the main influence on ministerial decision making,
25% believe that donors to political parties are the primary influence over government policy (Patel
and Quilter-Pinner, 2022). Moreover, politicians from both sides of the House have become more
vocal recently in their support for capping large donations, in light of wealthy donors being linked toindividuals under sanctions. This is, therefore, a weak justification for failing to pursue this reform,
which remains as needed today as it was when the Committee recommended it in 2011.
A more recent debate concerning big money in politics revolves around All-Party ParliamentaryGroups (APPGs). Currently, APPGs are not required to publish financial accounts; only those withfunding levels above a given threshold are obliged to provide a basic income statement on request.
Open Democracy reported that when it asked 190 APPGs to provide these documents in 2020, halfof them declined (Hovhannisyan et al., 2022). It should not be up to investigative journalists to dig for
information about APPGs’ funding sources: this should be public information disclosed in a consistentmanner in a centralised register maintained by the House of Commons. Parliamentary authorities
should be granted the power to shut APPGs down where clear conflicts of interest are identified,     as proposed by the Chair of the House of Commons Committee on Standards (Hovhannisyan et al.,2022).

63

Recommendation 4: Extend the statutory Register for Consultant Lobbyists to include inhouse lobbyists by amending the Transparency of Lobbying, Non-Party Campaigning andTrade Union Administration Act.
In-house lobbyists (meaning lobbyists that are employees of the companies they lobby for) are
not required to register their lobbying activities. As its name suggests, the statutory Register for
Consultant Lobbyists only requires consultant lobbyists to disclose their activities, which meansthat only lobbying undertaken by specialist firms is captured in the register. This is why neither
David Cameron nor Greensill Capital, for example, appear on the register, despite the fact they
were evidently engaged in intensive lobbying activities. In fact, only 4% of groups that appear in
departmental disclosures of meetings with ministers appear on the lobby register (McKay and
Wozniak, 2020).
The lack of any requirement for in-house lobbyists to disclose their activities means that the public
has no ability to scrutinise the activities of the vast majority of those seeking to influence those inpower. In Scotland, Ireland, and Canada, in-house lobbyists make up approximately 80 to 95%
of registrants (Transparency International UK, 2021). These are just a few of the many countries
whose registers include all types of lobbyists, regardless of whether they are in-house or consultants.
Furthermore, the statutory Register for Consultant Lobbyists only requires disclosure of a minimal
amount of information, including name and client list. In many other countries, including the US,
Canada, and Ireland, registrants are required to provide details of what they are lobbying for,including the specific pieces of legislation they’re seeking to influence.
The UK must raise its lobbying transparency to meet these commonly held standards by extending
its register to include in-house lobbyists, requiring registrants to provide a summary of their lobbying
intentions, and ensuring these summaries are updated at regular intervals. Disclosures of the maincontent of interactions with parliamentarians, regulators, and government should be required on amonthly basis, to ensure timely information is consistently available to the public.
Recommendation 5: Update the Ministerial Code to require departmental disclosures tobe published on a monthly basis and to include essential information about the content ofmeetings.
Departmental disclosures of meetings are also deficient, as they are published across multiple
different web pages on a quarterly basis, and provide only a brief statement of the perceived purposeof meetings and interactions. These disclosure processes should be consolidated and reformed,
requiring disclosures to be published on a monthly basis in a centralised database, and to provide
a concise overview of the topics and pieces of legislation under discussion. These changes wererecommended by the CSPL in its recent report “Upholding Standards in Public Life” (The Committee
on Standards in Public Life, 2021).
An expanded, more comprehensive statutory lobbying register (see recommendation 4) would
render departmental disclosures less necessary. However, Transparency International UK provides anumber of reasons for having both an improved register and improved departmental disclosures side
by side, including that having “dual disclosures provides a safeguard against accidental or intentional
failures to report” (Transparency International UK, 2021).

64 The Power of Big Finance June 2022

Recommendation 6: Reform the appointment process for the Bank of England’s committee
members, ban future external committee members from holding positions at regulated
financial institutions while serving at the Bank, and require committee members to disclose
their financial interests.
All appointments to Bank of England decision-making committees are either made unilaterally by the
Chancellor or are dependent on the Chancellor’s approval. As proposed in a previous Positive Moneyreport ‘Seeking Legitimacy’, this process should be reformed to incorporate input from the Treasury
Select Committee (TSC), which should be given the opportunity to see a shortlist of candidates andoffer its views on how committees could be diversified (Macquarie et al, 2019). For appointments
to the position of Governor of the Bank of England, a shortlist of candidates should be published toallow for public scrutiny and debate to feed into the final decision.
Furthermore, almost a fifth of current policymakers across the committees still hold positions in theprivate financial sector. The Bank justifies this by saying that independent members “sit on a parttime basis, and are appointed on the basis of having knowledge or experience which is likely to be
relevant to the Committee’s functions”, and “may therefore be considered for appointment, and may
be able to remain members of the Committee, when they have an existing interest, or acquire a
new interest, which may give rise to an actual or potential conflict of interest and/or duty” (Bank ofEngland, 2019). Although these members are employed part-time, that does not negate the fact thateach has voting power on policies that directly impact not just the British public and economy, but
their private interests, too.  
While we agree that there is value in recruiting committee members from outside the Bank, we
recommend that no committee members should be allowed to simultaneously hold paid positions infirms regulated by the Bank, as the potential for conflicts of interest to arise is too high. This would
not prevent committee members undertaking employment in other areas, such as academia, civilsociety, or private sector companies that fall outside the Bank’s regulatory perimeter.
Lastly, under the Bank’s internal policy on personal financial transactions, committee members
are required to report annually their stock of financial assets and liabilities to the Bank’s Secretary
Department (Bank of England, 2021c). In the interest of transparency, we recommend that the Bank
publish this information on its website (see Box 6 for more information on committee members’
shareholdings).
Recommendation 7: Update the Business Appointment Rules to establish longer ‘cool off’
periods and bans on lobbying for ministers, civil servants, and independent regulators, andestablish a statutory body to enforce these rules.
Under the ‘Business Appointments Rules’ set by the government, Ministers and senior civil servants
taking up private sector employment are subject to a two year ban on lobbying the government.
Permanent Secretaries, the most senior civil servants, and Cabinet Ministers are also required toabide by a minimum ‘cool-off’ period of three months between leaving their role and taking up private
sector employment. Furthermore, both ministers and senior civil servants that wish to take a private
sector job within two years of leaving their roles in government must file an application with theAdvisory Committee on Business Appointments (ACoBA), which advises on the suitability of suchcareer transitions and whether further restrictions should be considered (Maer and Strickland, 2019).
65

ACoBA is, therefore, the main official body responsible for scrutinising the revolving door between
government and the private sector.
There are multiple widely recognised problems with this institutional setup. First, the length of cool
off periods and lobbying bans is insufficient. The CSPL has proposed that the rules be amended toinclude a cool-off period of two years for any former minister or civil servant that has “had significant
and direct responsibility for policy, regulation, or the awarding of contracts relevant to the hiring
company,” as well as a lobbying ban of up to five years (Committee on Standards in Public Life,2021).  While we support this recommendation, we encourage lawmakers to consider going a stepfurther with a lifetime ban on lobbying. The Canadian ethics framework already includes a lifetime
ban that prevents former officials from lobbying on any specific “proceeding, transaction, negotiationor case” they previously worked on (Government of Canada, 2017). In the US, multiple policymakers
have proposed a more wide-reaching lifetime ban on all forms of lobbying to effectively prevent
former officials ever obtaining improper access or favours for private sector firms (Carney 2017;
McKenna 2018; Golden, 2021).
Second, the Business Appointment Rules lack any statutory basis and no sanctions are enforced
for failures to comply. In other words, individuals can freely choose to ignore the current cool-off
periods and lobbying bans and face no consequences (other than the possibility of public disapproval
if their non-compliance is noted by ACoBA and widely publicised by the media). Therefore, we
endorse the CSPL’s recommendation that “[t]he government should make adherence to the BusinessAppointment Rules an enforceable legal requirement for ministers, civil servants, and special
advisers, and set out what the consequences for a breach of contract may be.”Third, ACoBA also has no statutory basis, and has been described as “toothless” (Public
Administration and Constitutional Affairs Committee, 2017). Under current arrangements, the ACoBA
may determine that an appointment is unsuitable, or that further restrictions should be applied
beyond the minimum requirements outlined in the Business Appointment Rules, but it lacks thepower and resources to monitor compliance with its rulings, investigate potential breaches of theBusiness Appointment Rules, or impose sanctions. The PACAC, CSPL, and anti-corruption civilsociety groups among others have called for ACoBA to become — or be replaced by — a body thathas statutory footing, with the necessary regulatory powers and resources to achieve its objectives(The Committee on Standards in Public Life, 2021).
Fourth, senior civil servants below the level of Permanent Secretary and Director General, as well as
roles in independent regulatory bodies such as the Bank of England, fall outside the remit of ACoBA.
In its 2016 report “Striking the Balance: Upholding the Seven Principles of Public Life in Regulation,”
the CSPL found that close to two thirds of the 60 regulators it surveyed did not even have a policy
on former employees moving into the sector they previously regulated (Committee on Standards in
Public Life, 2016). We recommend that once ACoBA becomes — or is replaced by — a strengthened
and better resourced body with a statutory basis, its remit should simultaneously be extended tocover at least Director and Deputy Director levels, as well as senior roles in independent regulators.

66 The Power of Big Finance June 2022

6.2. Promoting a regulatory framework that serves the public interest
Recommendation 8: Discard plans to introduce growth and international competitivenessobjectives for regulators, and instead introduce statutory objectives on financial inclusion
and alignment with the Paris Agreement.
Under the government’s current proposals for the Future Regulatory Framework, the FCA and the
PRA would be given new secondary objectives for growth and international competitiveness. Within
the proposals, the government frames the financial sector as an “engine of growth for the wider
economy”. However, the empirical evidence indicates that growing the financial sector further will
have a negative effect on the real economy overall (as a result of the ‘finance curse’ detailed in
section 4.1).
Competitiveness objectives for financial regulators were also a significant contributing factor to
the 2008 global financial crisis. Andrew Bailey (speaking while chief executive of the FCA, now
Director of the Bank of England) commented that “before the financial crisis, the Financial Services
Authority (FSA) was required to consider the UK’s competitiveness, and it didn’t end well, for anyone
including the FSA.” The FCA’s incumbent chief executive, Nikil Rathi, has also spoken out against acompetitiveness objective. Despite these concerns, and those of civil society groups, regulators areagain being pushed to adopt a ‘soft-touch’ approach by a government primarily serving the interestsof the financial sector. The government’s decision to propose these objectives was directly informedby the successful lobbying efforts of large financial institutions (all available evidence, including thegovernment’s own public statements, strongly indicates this — see Box 2 in section 1.1).
The regulatory framework of the financial sector should ensure financial firms act in the interestsof communities by creating jobs and supporting businesses within a sustainable economy, which
could be better achieved by giving regulators statutory objectives and regulatory principles that focus
directly on positive social outcomes, such as financial inclusion.
In the Future Regulatory Framework consultation process, the government proposed to update
an existing regulatory principle for sustainable growth to reference climate change and a net zeroeconomy. This alone would be a small positive step, but could easily be overridden by the stronger
statutory objectives for growth and competitiveness the government has proposed. Instead, a new
statutory objective for regulators to guide the financial sector towards alignment with the Paris
Agreement would be a more effective and proportionate change to address the climate crisis, andwould empower regulators to play their part in supporting the green transition (Finance Innovation
Lab et al., 2022).

67

Recommendation 9: Require the FCA and PRA’s statutory panels to consist of at least 50%
public interest representatives.
The government’s proposals for the Future Regulatory Framework include a strengthened role forstatutory panels, requiring regulators to consider input from stakeholders while developing policy andregulation. While the government does acknowledge the need for the panels to include a diverse
range of stakeholders in the consultation, no specific measures are mentioned to ensure panels
reflect a range of backgrounds and experiences. In addition, there is a greater risk of regulatory
capture by large financial sector firms: under the new framework, parliamentarians will be distanced
from the line-by-line regulatory decisions, and panel members representing the interests of financial
sector firms will be in a stronger position to influence regulator decision-making.
To counterbalance this, the voices of industry, consumer and civil society representatives shouldbe allocated a substantial presence on all statutory panels. The FCA and PRA’s new statutory
panels should consist of a maximum of 50% industry representatives, with at least 50% allocatedto consumer and civil society representatives. In addition, sufficient resources should be provided
by the regulators to all representatives, enabling public interest groups to participate constructively
in the panels alongside industry. The PRA should also convene a new statutory panel for publicfacing consultations, bringing the PRA’s level of public engagement in line with the FCA’s (Finance
Innovation Lab et al., 2022).
Recommendation 10: Establish a new financial services joint committee to provide in-depth
scrutiny over changes to legislation and regulation.
Brexit provides an opportunity to build a new regulatory architecture which ensures that Britain’s
financial system serves society, as the UK onshores decision-making previously made at the EU
level. However, as this report shows, there is a risk of new legislation and regulation being dictatedby vested interests, due to the considerable power large financial firms are able to exert overpolicymakers through a number of different channels, usually outside of the public eye.
The government’s proposals for the post-Brexit Future Regulatory Framework would see increased
decision-making power granted to the Treasury and regulators, which remain vulnerable to regulatory
capture. It will therefore be important to ensure that increased power over financial policymaking is
met with a commensurate increase in public scrutiny.
The role of parliamentary committees is crucial in providing public scrutiny over legislation andholding policymakers to account. Combined with the recommendations in this report to mitigate
Parliamentarians’ vested interests, a new financial services joint-committee, comprised of members
from the House of Commons and Lords, could play a key role in ensuring changes to legislation andregulation are adequately scrutinised to safeguard the public interest.
This committee should be empowered to question the government and regulators, and undertake
reviews and inquiries into the impacts and effectiveness of new financial services legislation andregulation. Due to the often highly technical subject matter, any such committee should be supportedwith significant independent resources, in a similar manner to how committees such as the Public
Affairs Committee is supported by the National Audit Office (Finance Innovation Lab et al., 2022).

68   The Power of Big Finance June 2022

6.3. Reducing our economic dependence on banks, card companies and private
sector finance
Recommendation 11: Implement a fair and inclusive digital payment method provided as apublic utility.
Households and firms are heavily reliant on commercial banks to make payments. This dependence
leads policymakers to frequently align with the interests of big banks regardless of lobbying efforts(see section 5). Banks and card companies also capture considerable sums of money in debt
repayments, overdraft fees and transaction fees from the real economy, which collectively amountto the extraction of substantial ‘economic rents’ from communities and businesses.Reducing the
economy’s dependence on commercial banks will therefore require the provision of payments
and financial infrastructure that does not fundamentally rely on the solvency and profitability ofcommercial banks, card companies and technology firms. Digital payments and basic accounts
services must therefore be provided under a public utility model.
Providing digital payments as a public utility will require a range of new policies to be implemented
in parallel. Firstly, the Bank of England must issue universally accessible public digital money,
which people can hold and transact with without relying on commercial banks as intermediaries.16
Secondly, a widely trusted and publicly-owned institution, such as the Post Office, should be
empowered to provide people with access to payments and basic accounts services that send,
receive and store the digital money issued by the Bank of England. The newly established public
payments system would then safely operate alongside other means of payment, including physicalcash, bank deposits, and new privately issued forms of digital money such as ‘cryptocurrencies’.
Alongside the new provision of digital payments services as a public utility, universal access to cash
withdrawals and deposits must continue to be provided, and acceptance of cash as a means of
payment by shops and businesses should be well supported. Digital payment methods are rapidly
gaining in popularity, and this trend is widely expected to continue; however, millions of people acrossthe UK still rely on cash, and will continue to do so for the foreseeable future.
A further consideration is the long-term need for digital money to recreate the key benefits of physicalcash to the fullest extent possible. To achieve this, the Bank of England could issue a true digital
cash: digital money that circulates as a token or bearer instrument, able to be transferred ‘peer topeer’ without the need for any centralised account services. As the use of physical cash declines,
the risks of surveillance, economic exclusion and exploitation through digital payment systems— whether by government institutions, governments of other nations, powerful corporations, orindividual actors like hackers and criminals — correspondingly increases. As a result, the further the
UK moves increasingly towards a cashless society, the greater the public-interest case becomes
for the Bank of England issuing digital cash. Launching digital cash is an urgently needed policy
response to the rapid decline of physical cash services.

16. Such a proposal is commonly referred to as a central bank digital currency (CBDC), and can both take the form of accounts at thecentral bank, or a bearer instrument ‘token’ (similar in principle to physical cash).
69

Recommendation 12: Foster a more diverse banking ecosystem that serves the needs of local
economies and communities.
Financial institutions play a vital role in society, facilitating the investment that enables economic
activity to take place. Private financial companies, including those that are for-profit, do not always
have interests that conflict with the wider publics’, and there are a number of purpose-driven
lenders in the UK that are demonstrating the positive role the sector can provide for society.
These include stakeholder banks with alternative ownership structures, such as community
development financial institutions (CDFIs), mutuals and credit unions, as well as more ‘traditional’banks with ethical missions, such as Triodos. Unlike publicly-listed commercial banks, whose main
objective is to maximise shareholder value, these alternative financial institutions are able to pursue
not only economic but also social and environmental goals. Stakeholder banks have been found tobetter serve the needs of customers and communities, such as by lending more towards the real
economy to support local economic development, and making greater efforts to increase financial
inclusion, as well as having a more positive impact on financial stability (Prieg and Greenham, 2013).
The UK banking sector is currently dominated by a small number of large shareholder owned
lenders, with just five commercial banks holding 87% of the retail market in 2018 (Reuters, 2018).
This is a much higher level of market concentration compared to other European countries such as
France and Germany, where the market share has been evenly split between a larger number ofcommercial banks, mutual and cooperative banks, and (in the case of Germany) state banks, andwhere correspondingly SME’s financing needs are much better supported (Saravia, 2022; Statista
Research Department, 2022).
To ensure a financial sector that serves society, policymakers must do more to foster a more diverse
banking ecosystem in the UK. Financial regulation currently favours the large incumbent firms andprovides considerable barriers for alternative lenders. New legislation such as the Financial Services
and Market Bill should actively promote stakeholder banking models, and enable regulators toensure a more level playing field. The existing UK Infrastructure Bank should be empowered, or a
new institution established, to serve as a public development bank, that supports local economies,
operating on a decentralised basis — enabling investment decisions to be made by local orregional authorities.

70   The Power of Big Finance June 2022

7. Conclusion
The excessive political power of the financial industry undermines democratic
control of our economy. As this report has shown, the financial sector in the UK
exerts significant influence over Parliament, the Bank of England, and HM Treasury,     which prevents optimal conditions for economic policymaking in the interests ofsociety at large.
The financial sector is pushing to roll back important regulatory protections, put in place in responseto the global financial crisis in 2008, by leveraging close financial ties with parliamentarians andpolitical parties. With huge lobbying budgets, financial firms have been able to secure unequal
access to financial policymakers, holding disproportionately many meetings and overwhelming
consultations with submissions in order to weaken regulatory constraints on their commercial activity.
A clear theme has emerged of Chancellors and Bank of England officials moving freely between thespheres of regulators and regulated entities, blurring the lines between financial lobbyists and public
servants. The most powerful financial firms are pushing the narrative that finance must continue togrow unabated for the real economy to prosper, despite the fact they lend primarily to each otherand into the property market, and rarely lend money to the most socially productive sectors of theeconomy. Underlying all of these channels of power, finance exerts structural power over democratic
decision-making by playing a central role in allocating credit and investment to different economic
sectors, and providing the essential payments infrastructure that allows money to circulate in theeconomy. This structural importance enables private finance to exploit its status as ‘too big to fail’
to disproportionately influence public policy, with the sector’s growth regarded as paramount to thewider economy’s success, regardless of the social and environmental costs.
Our democracy does not have to function this way. It is possible to have a financial sector that works
for the public, not the other way around. Conflicts of interest within Parliament can be tackled by
implementing stricter regulations over parliamentarians, and enforcing a cap on donations that canbe made to political parties. Lobbying has a place in democracy, but we must ensure transparency
and share access to these channels of political influence fairly between industry, civil society, andcommunity representatives. Regulation must be guided by a framework aligned with the public
interest and the Paris Agreement, rather than promoting the competitiveness of the City of London.
The revolving door can be shut by establishing safe cool off periods for policymakers when theyleave public office. More space can be made for ethical finance that puts serving local communities
and respecting the environment first. Finally, the structural dependence on finance as a mechanism
for policymaking can be fixed by the creation of a public payments system: a safe and inclusive
public infrastructure for making payments and accessing vital financial services.
This report’s policy recommendations would place fairer limits on the political power of the financial
sector, enabling the voices of communities, civil society and the real economy to be heard on the roleand future of finance.

71

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