MPs are setting up a new body to oversee the UK’s regulators, as Brexit continues to heap pressure on agencies such as the Financial Conduct Authority.
A fresh sub-committee will investigate regulatory proposals for financial services, with “new forms of scrutiny” required “given the number of regulatory initiatives is likely to grow as regulators assume additional responsibilities following the UK’s exit from the EU”.
The Sub-Committee on Financial Services Regulations will be able to call on regulators to give evidence and request documents from them. It will initially include all of the Treasury Committee’s current MP members, and be underpinned by “a new and well-resourced unit of experts and specialists”.
“Following the UK’s exit from the EU, our regulators have assumed significant new responsibilities,” Treasury Committee chair Mel Stride said. “Those will require scrutiny, and parliament has an opportunity to put in place a process that is less bureaucratic and significantly more nimble than was previously the case in the European Union.”
The sub-committee plans to intervene at the consultation stage of regulatory proposals. The new Financial Services Scrutiny Unit that will sit alongside it will feature specialist advisers, staff members of the Treasury Committee, and a legal adviser from the Office of Speaker’s Counsel.
Currently, the UK’s chief financial regulators — the FCA and the Prudential Regulation Authority — operate as arm’s-length bodies from the government. Politicians have the power to appoint the watchdogs’ leadership and set their overall remits and funding models through legislation, but, on a day-to-day basis, the regulators are operationally independent from the Treasury.
While the Treasury Committee holds regular interrogations of senior staff at the watchdogs, and an independent Complaints Commissioner also assesses complaints about their work, a supposed lack of proper scrutiny over watchdogs’ decisions has long irked many City watchers, particularly as they take control of rule-making powers that previously sat with EU institutions.
The government is looking to make regulators more accountable in the wake of the split through its Future Regulatory Framework — an effort to usher in a new form of regulation post-Brexit. The framework is set to change how government oversees regulators’ cost-benefit analyses and give the regulators new objectives from parliament.
“It is widely accepted that the transfer of rule-making powers to UK regulators should lead to enhanced scrutiny by the UK parliament, to monitor the exercise of those powers,” the Treasury Committee said in its 23 June statement on the creation of the sub-committee.
However, the Treasury Committee has not supported all aspects of the government’s drive to reform an independent UK framework for regulation. In a 16 June report, the group of MPs urged the government to “respect the principle of regulatory independence”, and set a goal of long-term economic growth for the regulators instead of international competitiveness as planned by the government.
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