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UPDATE 1-Bank of England and City square off over new government powers

(Recasts with BoE Deputy Governor Jon Cunliffe)

By Huw Jones

LONDON, Oct 19 (Reuters) - A plan to give the British government power to override watchogs would raise "serious concerns" about the ability of regulators to oversee the City as a global financial centre, Bank of England Deputy Governor Jon Cunliffe said on Wednesday.

While Britain remains home to Europe's biggest financial sector after its exit from the European Union, banks are keen for regulators to help boost the City's global competitiveness.

Britain's finance ministry will use a financial services and markets bill now before parliament to give itself powers to intervene in financial rule-making, when in the public interest.

City Minister Andrew Griffith has said there would be no day-to-day interference in watchdogs, but the wording of the new power has yet to be made public.

"A power which would call-in, rewrite, veto rules that the regulator has made, frankly, gives me anyway serious concerns with the history I have seen over 30 years in the UK financial sector," Cunliffe told a committee of lawmakers scrutinising the bill.

Credible UK regulators were a "necessity" to maintain London as a centre for banks from across the world, whose home regulator need reassurance they were not importing risks from the United Kingdom, Cunliffe said.

A veto power would affect the perception of independence of the regulatory part of the Bank of England, he added.

'REASONABLE INSTRUMENT'

Emma Reynolds, managing director at TheCityUK, which promotes UK financial services abroad, said London was losing ground to New York in company listings, and regulators were taking too long to authorise senior hires at financial firms.

If tightly defined and used as a matter of last resort, powers of intervention could be a "very reasonable instrument", Reynolds told the committee.

"There is room for improvement in having a commercial mindset in the regulators," she added.

Asked if the bill will trigger a culture shift for regulators to be nimbler, Cunliffe replied: "With greatest of respect, I don't think I need my culture shifted within the regulatory framework that we have at the moment."

David Postings, chief executive of UK Finance, a banking lobby, said powers to override regulators should be tightly drawn and used sparingly.

"It's a very difficult trick to pull off, but we should be able to do it," Postings said.

Before he was sacked as finance minister this month, Kwasi Kwarteng promised a deregulatory "Big Bang 2.0" that goes further than the bill in boosting City competitiveness, raising the prospect of further pressure on watchdogs in areas like insurance capital rules.

A source at the ministry confirmed this was still the plan under new finance minister Jeremy Hunt.

"We are committed to making our financial services sector one of the most open, well-regulated and technologically advanced markets in the world, and have committed to set out ambitious reforms in the coming weeks. We will formally announce a date shortly," the source said. (Reporting by Huw Jones; Editing by Kirsten Donovan and Emelia Sithole-Matarise)

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