The UK government has published its long-awaited Financial Services and Markets Bill, ushering in a new era of scrutiny for the Financial Conduct Authority and the Prudential Regulation Authority.
In a reform package published on July 20, regulators were given the power to repeal large swaths of old EU rules following Brexit. However, the government is stepping up its scrutiny of them, with a series of measures welcomed by the majority of respondents to a consultation on the new framework published alongside the bill.
Respondents “generally welcomed” giving the Treasury the power to force the regulator to revise its rules when it believes it is in the public interest. Some claimed it didn’t go far enough to force a rule change or when a review might be triggered.
However, they asked for more details on when it would be used. The bill confirms that the government can compel the regulator to review the rules if they have been in place for at least 12 months, and it does not appear to the Treasury that the regulator is carrying out its own review. Powers to impose changes to the rules themselves, a so-called “call” from ministers, remain under review.
Regulators will be urged to pursue growth and international competitiveness in addition to their current objectives of protecting markets and consumers.
The government said a “significant majority” of respondents to its consultation also believed the new secondary objective struck the right balance with consumer protection and market integrity.
The government added that other respondents were evenly split between those who believed the objective of competition would erode regulatory standards and those who believed competitiveness should be a “primary” objective to make a difference.
The majority of those polled also backed government proposals to force regulators to think about how their rules would fit into trade deals with other countries, the Treasury said. However, the government did not provide specific figures on the number of respondents occupying each of these positions.
Some feared it could again lower regulatory standards in order to preserve trade deals, and wondered what would take priority in any dispute. The government has moved ahead, which means regulators will have to consult with the Treasury on changes that could impact its work with foreign jurisdictions.
While the Treasury Committee of MPs already carries out regular questioning of FCA leaders, the government has now imposed a formal obligation on the FCA to inform the committee when it publishes a consultation and to respond if a parliamentary committee intervenes. in a consultation.
The government is also forcing the FCA and PRA to publish the frameworks they use to carry out cost-benefit analyzes on their rules, as the idea was “strongly welcomed” by respondents. The government will dictate what should be covered in these framework statements. It will also order the creation of a new panel to weigh in on cost-benefit analyzes before and after they are published by the regulator.
The government will require the regulator to “consider” its commitment to achieve net zero emissions by 2050 – a lower status for regulatory principles. He decided not to consider financial inclusion in the same way, saying this is already covered by existing FCA initiatives, for example on vulnerable customers and access to cash. The government has also given itself the power to introduce specific areas that it does not believe are currently covered by the regulator’s objectives.
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