Chancellor John Healey, in his new role at the Treasury, needs to recognise that the City's competitive landscape has fundamentally changed. The focus has moved from the exchange-focused concerns of the mid-2000s to a modern model where investment banks increasingly depend on shared, industrialised infrastructure, according to Joe Channer.
Healey previously introduced the Investment Exchanges and Clearing Houses Act in 2006, aiming to protect London's market infrastructure and its light-touch regulatory regime. However, two decades later, the significant change in the City's operations is less about exchange competition and more about investment banks seeking to relinquish control of less glamorous business parts for efficiency.
Investment banks are now managing extensive operational estates across multiple countries, leading to challenges such as diverted boardroom attention, absorbed capital, and increased operational risk. The complexity of regulation has also grown significantly since 2008, technology investment cycles have accelerated, and cloud migration remains complicated. The emergence of AI further highlights the limitations of fragmented infrastructure.
This has led to a move towards a different model where banks are externalising infrastructure they once owned. This is described as the industrialisation of financial market infrastructure, with shared platforms delivering technology operations, cloud, governance, and automation for multiple institutions. Banks aim for lower operational complexity, variable fixed costs, and access to modern technology without repeatedly funding expensive transformation programmes.