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Welcome to in the.

City, stand clear of the doors.

Each week we unpack a story that's crucial to the world's financial capitals and Francis Lacua.

Tuesday night, the Chancellor Rachel Reeves gave her second Mansion House speak to the key players in London's financial sector.

Given annually, it's an opportunity for the Chancellor to speak directly to the city and communicate their plans for growth, financial regulation, deregulation and general direction of travel.

While joining us now in the London Studio, which is actually just a stone's throw from Manchion Houses.

Bloomberg's City editor Katherine Griffiths.

Catherine covers the UK finance and regulation here in London and was also in attendance at the speech Welcome to the City.

Catherine, I'm so always so happy to speak to you.

I'm very happy to be here.

You always have great color in kind of you know, explaining some of maybe the tricky things on regulation and deregulation.

But what was the vibe like in the room.

I thought there was a particularly strong turnout last night, and I felt that people did that quite deliberately.

So it really is a key event in the calendar of city folks.

They don't have to wear any kind of fancy black tie white tie anymore.

They can go in their cash lounge suits.

But I felt like there were really quite a lot of chief execs and chairs.

They're particularly so last night, and the vibe was very much And obviously I'm a journalist, so you know people will being themselves when they sort of mill around and speak to me.

But I did think people wanted to present quite a positive and constructive image and message about the Chancellor and wanted to get behind her announcements.

This is not to lobby the chancer.

Is it to show face that actually they've had demands or is it really to listen to what she has to say?

So I think it's it's kind of the result of the lobbying.

So these folks, the bosses of these various different financial services firms, all the kind of the lawyers and the advisors have been in to see her and the Treasury team and I think we're pretty pleased with the content of her speech, and that is quite unusual because last year's Mansion House many other of these set piece events are a bit of a damp squib.

There isn't there much there, and there's quite a lot of skepticism about what is there actually turning into real changes.

People definitely felt like she was announcing some big things.

They certainly had the caveat of them needing to be delivered, but they felt like they actually, maybe finally might make a difference.

And this would it make a meaningful difference to growth or does it make some difference to growth.

I think it will make in the round some difference, tending towards a bit more than some difference to growth.

But I also think there'll be people out there in the wider world who will be a bit concerned because, of course, the flip side of taking on more risk is potential for their being losses and those losses ending up at the door of ordinary people.

And of course that won't be the intention or the plan for this labor government, but it is inevitable that that risk is increasing as a result.

So I guess some of the most significant changes or proposals is ring fencing.

How welcome was that from banks?

Banks actually have different views about ring fencing.

Some have been definitely pushing for there to be changes for this construction that the UK was really alone in bringing in to sort of ring fence pots of money in the in the sort of safe high street banking side and leave the riskier investment banking side more to the vagaries of you know what might happen to them and if they failed, they failed kind of thing.

Of course, we haven't actually seen the regime in operation and nothing has really it hasn't really been tested since it came into force.

Banks have spent millions and millions of pounds setting up their ring fencing structures and some wanted to see them reduced or done it done away with.

Others are actually kind of felt like, well, now they're here, maybe it's best for them to stay.

It's a bit of a mixed view on ring fencing.

I think that there probably is a view among the banks, and of course, when we think about the kind of audience of people sitting there at the Mansion House last night, they have start different interests and priorities.

But I think there is certainly a view among the banks and the asset managers and those who are interested in seeing valuations of stocks rise that more money does need to be put into stocks and shares and riskier assets.

So whether that's through pensions, through people's own cash savings, it's sort of a big chewy topic that the government has gone some way towards, but actually stopped short of making some big changes there, and that was because of opposition from certain parties that it wouldn't have suited.

Yeah, where do you see risk, you know, in the city.

Is it the banks or is it actually the private markets?

And so how much is a landscape postil changing?

Yeah, I mean, I suppose risk is across all of those things, private markets, given the sort of their enormous ballooning growth.

But I suppose if we think about direct risk to consumers and you know, private mastle market risk may well filter through to the real economy and real people's lives and jobs.

But it's interesting.

One of the most very very interesting things the government has said it's going to do is make some quite big changes to the Financial Ombudsman Service.

So this was set up to make it easier for ordinary people to make a complaint if they feel they've been unfairly treated by their financial services provider, and it was seen as a good idea and as sort of a powerful tool for people who couldn't really go through the courts.

But it's come to be this sort of you know, everyone loves to hate the financial Ombudsman service, certainly in the city of London.

And I think it is undoubtedly the case out there that when investors, especially other parts of the world that are slightly removed from the UK, they do ask, well, what's going on with the FOS.

And when I say FOZZ, I mean the Financial Onboardsman Service.

How can the FOS suddenly intervene in, say the banking market and say that car finance in this really huge way is wrong and it's going to cost the banks lots of money to compensate customers.

But on the other hand, I think it's definitely the case that these changes that may well come in to the FUZZ in really restricting its role and for example, really sort of cutting the interest rate that it will pay on compensation to people.

It could have a real effect.

And critics would say banks are quite good at, if not gaming the system, certainly being very very aware of where all the limits lie.

So if you take away protections from people, it is not that unlikely that at some point in the coming years there will be some big consumer scandal.

There won't be as much protection protection for people, and that actually will be a bad outcome and overall not that good for the UK.

I guess how is the city, you know, overall responding to Labor.

I know there's been a couple of ups and downs in terms of guilds and concerns over non domes and taxes which is now filtering through inflation.

But was the mansienhow speech away to reset that relationship.

Yeah, absolutely, I think that's very much the case.

I think as we as we know very well, Labor went on its prawn cocktail circuits and really tried to schmooz people, and then people felt very disappointed in the city with a whole range of things, the kind of downbeat message from Kiss Dharma that just the lack of action from Rachel Reeves a pretty terrible budget in their view, and then some sort of lack of kind of reversing of some of those measures.

So one of the big topics for people in the city is non doms and an expectation that Labor will have to reverse some of its non changes, but hasn't really yet done that, so that may well still be coming.

But that said, the message loud and clear is the city would much prefer Rachel Reeves as Chancellor to anyone else they think is a possible replacement for her from the labor benches.

And we saw that in the market reaction in Parliament when it looked slightly dodgy for Rachel Reeves last week, and it certainly is what people were talking about last night.

They want Rachel Reeves to stay in that job.

So the other thing that's of note, especially to younger listeners and first time buyers, is it changes to mortgage borrowing, allowing people to borrow at a higher multiple of their income encourage them onto the housing ladder.

I mean, is she trying to keep the city happy, was at the same time trying to take care of their base.

Yeah, I think she very much is trying to keep the city happy, while sort of yeah, having measures that for people out there in the country can actually mean something.

And yeah, so crucial for younger people to be able to have a realistic hope of getting on the house.

Of course, we know full well that people will say, well, we also need to see actual meaningful changes to planning so that there can be building and the sort of thorny issues of where that building can take place to create much more housing stock.

What do you think will be significant in the weeks and months to come?

Again?

What are the city?

What is the city looking for?

Again, it's execution of some of the things that she announced, because it's all nice and world to put it in a speech, but then it depends on practice what happens.

She really has actually announced this time quite a lot of big, meaty either changes or in the large parts areas that will be changed.

So of course it will be where those changes actually land, the actual details.

So you know, she's talked about supposedly meaningful changes to ring fencing.

You know, we don't yet know what they mean by meaningful, and I think there's a distinct chance that what they mean by meaningful could change over time.

But I mean, I do think what people in the city would like to see and would argue, I think with some reasonableness, is that this sort of flows of money coming into investments, into the stock market and into growth assets, because that if that can be solved.

If that liquidity problem can be solved, we really could see some revaluing of UK assets and that could be really fundamental to the economy, to choices of you know, where do exciting young companies list their shares?

Can we create that buzz and vibe?

Can we get more people, you know, really promising entrepreneurs coming to this country?

Can it?

Catherine?

Is there an understanding that you know, we could be there?

And I don't know how much weight to put on.

There's a lot of noise about non doms, right, that you're basically not only alienating alienating some wealthy people, but that the image of the UK that's given to abroad is actually of a much more you know, left wing socialists government.

Then maybe they want to be perceived.

As Yeah, I mean, I think that's true.

I suppose this is this is the kind of inherent conflict for labor that that's undoubtedly the case, and it definitely is the case that we hear from big British companies based here that when they go to see their investors or their prospective investors in other countries, they raise all these issues.

But obviously, on the other hand, you've got a labor party in power, for whom their base do not like non doms, that when they are asked, they're quite happy with the idea that these you know, supposed kind of rich foreigners would have to be tax for and not be given these advantages.

And so that really is a problem for this government, overlaid by the just the fiscal reality being so tough.

I think there's sort of a view.

I think that, for example, one thing they might do is introduce, you know, whether it might be called an entrepreneur's visa or an investor's visa, So they they keep the non dom rules, but they introduce some kind of attractive thing that has a more positive message.

So it might not enrage the base, but if you know, effectively would unravel some of those damaging measures for non doms.

Why is the chance for us so liked actually by the financial community.

I mean, she's been absolutely unmovable when it comes to like physical constraints.

Yes, I think they like her because they perceive her to be on the moderate writer side of the labor party with Kiss Starmer, and probably to the right of Kiss Starmer, and they perceive her to understand how important it is to maintain physical discipline.

They see that she's taking pain for that.

I don't think they actually particularly think she's the most kind of inspired and you know, to be remembered in history, Chancellor.

But I think they have faith that if she is a able to implement the measures she would like to will, they will create more opportunity for growth and investment.

Are they worried about where she finds the money after the U turn on welfare and benefits.

I think they are worried about that.

I think that there'll be lots and lots of speculation ahead of the budget.

I think they know when people were talking last night a little bit about how you can't rule out a wealth tax.

I don't think they think it's at all likely, and I think they take the view that Rachel Reeves and the treasure we do not want it.

So it's of course then you know about how she gets buffeted by other people in the party.

I think they definitely know there's a chance of a one off possibly bank tax.

Of course they're going to be against that, but I think they would be more pro a one off bank tax than some other measures.

I think it's quite likely that say some of the big banking bosses would take a one off bank tax.

If they get these reforms through in a meaningful way, that changes the structure because it.

Kind of offsets, right, the risk taking our sets maybe some of the money that they'd pay into the coffers.

Yes, and I think they'd be able to crucially sell that message to their investors too that well, you can see the state of the British economy.

This is actually a chancellor who believes in taking tough measures.

Of course, we hate the idea of bank tax, but you know we are in fact a very profitable sector, which, by the way, investors, that's good for you, but look at all the ways in which the actual the structure and the policies have changed, and that's going to be good for the long term in their view.

Was there anything else under the reader in terms of announcements at Mansion House that stuck out to you as being significant but maybe under reporting.

I think one thing that's really interesting is that on the top table you have, of course, Rachel Reeves, you've got all these you know, big cheeses from finance, but then you know you've got the heads of the regulators sitting there.

You've got some woods from the prudential regulation.

You've got nicol Rassi from the Financial Conduct Authority, and they're both of them actually are seen to be very very smart and effective people, but they are also people who have implemented these much tougher regimes.

And they would say they are doing the bidding of politicians, and you know, they're doing what they believe to be right, but they are It's not their jobs to set the rules there, it's their jobs to implement the rules.

But obviously this change of direction requires a very significant change for both of them, and it does come down to personalities a bit.

Both of them have come under quite a lot of scrutiny over whether they would be keeping their jobs and what the future holds well.

Sam Would's term is up next year twenty twenty six.

Sam has certainly personally been very very associated with some of these tougher measures.

He was very involved in creating the reforms after the financial crisis.

He's a good public servant.

He will, no doubt say this is the change of wind, change of direction by the government.

But I do think it will be very interesting to watch who they choose to put into those roles after the incumbent.

So who will this Labor Government see as an appropriate person to lead the Prudential Regulation Authority after Sam.

It could be quite an interesting choice.

So gathering after the Mansion House beach, what's next for the City of London.

It's looking at what will come with the budgets.

It's looking at whether the government will have to reverse some of its promises on no tax rises in certain key areas, and it is looking at whether we've obviously seen several big U turns on policies already.

I think the city will be very focused on whether she does shift on non doms.

Yatherine, thank you so much, Thank you Fran very much.

Thanks for listening to this week's In the City from Bloomberg.

This episode was hosted by me Laqua was produced by Somersadi Mosses and dam and tala Ahmadi.

Special thanks to Catherine Griffiths.

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