By Chris Dorrell
The UK’s financial regulators will be in focus as lawmakers consider a range of proposals to boost the accountability of watchdogs.
A range of amendments to the Financial Services and Markets Bill have been put forward, focusing on the scrutiny of regulators as the Bill returns to parliament this week.
Regulatory scrutiny has been a key concern for politicians and figures in the industry since the UK’s departure from the EU as regulators inherited much greater powers.
These concerns have only been heightened by a growing sense that the City is falling behind global peers, partly as a result of regulatory decisions.
Over recent months, various proposals have been put forward to enhance the accountability of the UK’s financial regulators, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).
One of the most important reforms proposed by the Bill is the introduction of a competitiveness mandate for the regulators.
To ensure regulators follow through on this, the government has tabled measures to make the regulators report twice to the Treasury on “how it has complied with its duty to advance the competitiveness and growth objective”.
Lord Bridges has retabled an amendment to create an Office for Financial Regulatory Accountability (OFRA) within a year of the Bill’s passage into law. Bridges initially proposed the creation of OFRA back in February, but later withdrew the motion without a vote.
According to the amendments, the role of OFRA would be to “examine and report on the performance of the FCA and the PRA.”
Amongst other things, Bridges argued that the body should prioritise scrutiny of regulations which “restrict domestic competition” and “reduce international competitiveness”.
Partner at Macfarlanes Michael Sholem said OFRA “seems to us to be a positive step, especially given the wide remit proposed for it”.
Regulatory Decisions Committee
Elsewhere, Lord Tyrie proposed that the Regulatory Decisions Committee (RDC), a subcommittee of the FCA which takes contested decisions on behalf of the FCA, be made independent.
Although the RDC currently operates separately from the FCA, the watchdog makes appointments to the committee and provides its resources. This fuels concerns that the RDC is not really independent, reducing market confidence in its decisions.
Tyrie has proposed that the chair of the body be nominated by the chancellor and give the body independent funding.
The proposals were supported by regulatory partner at Fladgate Douglas Cherry. “The FCA enforcement process has always been skewed in favour of the authority which sets the parameters of the investigation scope, process and outcome,” he said.
“Creating greater separation can only be a good thing for the perception and hopefully, reality of independence between the investigative and outcome elements of the process,” Cherry continued.
More broadly Sholem argued that while the reforms would be welcomed, lawmakers should focus more on providing expertise in future.
“We think a key further objective of these reforms should be to ensure that there is sufficient expertise to hold the regulators accountable; this means resourcing those bodies tasked with such scrutiny with sufficient funds and autonomy to be able to recruit and retain industry experts,” he said.
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