Treasury drops plans to intervene in financial regulation
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The UK government has decided not to proceed with a proposed amendment to the financial services and markets bill that would give it more control over financial regulators.
The government had considered creating an 'Intervention Power’ that would have enabled the Treasury to direct the Prudential Regulation Authority and the Financial Conduct Authority to make, amend or revoke rules where there were matters of significant public interest.
However, economic secretary to the Treasury Andrew Griffith said last night the government would not proceed “at this time” so that it remains “committed to the operational independence of the financial services regulators”.
He said: “Having consulted further, we are of the view that the existing provisions in the bill are currently sufficient and will already allow us to seize the opportunities of Brexit by tailoring financial services regulation to UK markets to bolster our competitiveness.”
The government will keep this matter under review and return to the issue if it sees the regulatory framework “is not able to fully support the government’s vision for the UK’s financial services sector”.
Why is it important to have an independent regulator?
Why is it important to have an independent regulator?
The Association of British Insurers and the FCA would not comment on the decision. However, during a speech at the Lord Mayor's City Banquet at Mansion House on 27 October, FCA chief executive Nikhil Rathi said: “It is vital that this independence and agility at speed is not undermined by any proposed call-in power.”
Using the FCA’s Supreme Court case on business interruption insurance as an example, Rathi said one insurer argued that the authority was undermining competitiveness of the UK insurance industry by litigating to secure clarity for policyholders.
In response, he said the FCA is open to simplifying regulation “without undermining rigour”, adding: “A market in which insurers do not meet their legal obligations to customers will not be a sustainably competitive one.”
Rathi concluded: “As an independent regulator, we have shown we can act quickly.”
The PRA has also been contacted for comment.
Introduced in July 2020, the bill brings in a number of “enhanced mechanisms” for accountability, scrutiny and oversight of the regulators and measures to bolster the competitiveness of the UK as a global financial centre.
It was not the first time that City watchdogs had come under scrutiny by the government.
In August, the then Tory leadership candidate Liz Truss was rumoured to consider merging the FCA, the PRA and the Payments Systems Regulator into one regulatory body if she became the UK’s next prime minister.
She went on to become PM in September before stepping down last month.
Would the intervention power have threatened the independence of financial regulators?
