Some regarded the changes as the only way to salvage Brexit reforms in the Square Mile. Proposed relaxations of Solvency 2, the Brussels rulebook requiring insurers to build vast capital buffers on their balance sheets, have been singled out by frustrated ministers as an important area where intransigent technocrats have stood in the way.
By the same token, it is a huge victory for Bailey – as well as Sam Woods, head of the Bank’s Prudential Regulation Authority, and Nikhil Rathi, boss of the Financial Conduct Authority, who had fiercely resisted the move and warned publicly against the consequences.
Sunak had proposed a controversial new “intervention power” earlier in the year when he was Chancellor that would allow Downing Street to step in and overrule regulatory decisions in extraordinary circumstances.
Both Sunak and Truss had argued that this “call-in” power was needed to ensure politicians are ultimately responsible for major regulatory changes, rather than “faceless regulators”.
It was an attempt to reassert political control and quell growing unease among some elements of the Tory party that believed the Bank was in danger of becoming unaccountable – a fear that had largely stemmed from its failure to tame inflation.
During the leadership contest, Truss had also pledged to review Threadneedle Street’s mandate if she became prime minister, and she questioned the Bank’s use of quantitative easing, claiming inflation had been partly caused by “increases in the money supply”.