The government, FCA and BoE have responded to the Treasury Committee’s fifth report on the future framework for regulation of financial services.
The government’s response is brief as it intends to bring forward more detailed proposals in a second consultation in the autumn (its first consultation closed on 19 February 2021). However, the response notes that:
- the government is committed to preserving the regulators’ operational independence;
- the independent regulators should have responsibility for setting the direct regulatory requirements that apply to firms, operating within an overall policy framework set by government and Parliament; and
- the government welcomes the Committee’s recommendation that a ‘targeted approach’ to scrutiny by Select Committees is the appropriate model for Parliamentary scrutiny.
Highlights of the FCA’s response include:
- the FCA would support any measures Parliament takes to ensure it has a sufficiently detailed understanding of how the FCA is making decisions, within the bounds of what it can legally share under FSMA;
- the FCA welcomes the suggestions in the report as to how Parliament and the Treasury Committee can continue to effectively scrutinise and engage with the FCA’s work;
- independent regulation is important to maintaining robust, fair standards and maintaining a consistent approach for firms, markets and consumers; and
- in terms of the relationship of FOS decisions to the FCA’s regulatory framework and the Committee’s concerns in this area, the FCA and FOS are currently considered whether any changes to current arrangements are needed.
The BoE’s response includes a suggestion that, in order to ensure regulatory effectiveness, the framework should be shaped by the following key principles:
- maintaining high standards, which are crucial to both existing objectives and to the UK’s international standing as a place to do business;
- dynamism to respond to new opportunities and risks;
- efficiency so that the cost of regulation to the public and to firms remains proportionate;
- transparency around regulatory decisions and the rationale for them, to support legitimacy; and
- taking a UK-tailored approach to setting standards while meeting international norms, rather than becoming ‘rule-takers’ who mechanically apply other jurisdictions’ approaches.