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UK Government Faces Fresh Calls to Scrutinize Regulators
(Bloomberg) -- The fight over who watches Britain’s financial watchdogs isn’t over yet.
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Members of the UK’s House of Lords are preparing amendments to the Financial Services and Markets Bill that would boost oversight of regulators, while City of London groups are also lobbying the government on the issue.
It became a hot topic last year when the government put the City of London at the heart of its post-Brexit growth strategy. To achieve that goal, the government said the Financial Conduct Authority and Prudential Regulation Authority should take international competitiveness into account.
While ministers wanted to back up that plan with a “call in” power to block regulators’ decisions, this idea was abandoned amid accusations that it would undermine the independence of the watchdogs and hurt the UK’s international reputation.
Officials have been reluctant to revisit the issue as they aim to get the long-planned bill passed by this summer, according to people familiar with the matter, who asked not to be named speaking publicly on the issue. But the Treasury could still give ground and amend the bill to avoid opposition from the House of Lords.
Chancellor Jeremy Hunt is aiming to show progress over the government’s “Edinburgh Reforms” in his Mansion House speech in July and officials also hope to sign a long-awaited “memorandum of understanding” with the European Union over financial collaboration in the coming months.
Michael Forsyth, a peer and also chairman of Secure Trust Bank Plc, said he had “never seen such consensus” among his colleagues over the need for more parliamentary oversight of regulators.
“A wise government would respond to that rather than face defeat at report stage,” Forsyth said. Other peers calling for more oversight include Andrew Tyrie, former chairman of the Treasury Select Committee; George Bridges, who is an adviser to Banco Santander SA; and Jonathan Hill, the former European Union commissioner on financial services who carried out a listings review for the government in 2021.
Their ideas include setting up a statutory body to analyze the regulators’ performance against its objectives, and a joint Commons and Lords committee, as exists for national security.
Read More: UK Parliament Seeks Power to Scrutinize Finance Regulators (1)
Some industry groups are also pushing for change. Caroline Wagstaff, chief executive of the London Market Group, which represents insurers and reinsurers, said additional “robust accountability mechanisms” were needed to ensure regulators deliver on their new competitiveness objectives.
Emma Reynolds, TheCityUK’s managing director of public affairs, policy and research, said a provision in the bill for regulators to report on their performance was positive, but that “there remains a need for further scrutiny and oversight measures to ensure accountability.”
The Treasury declined to comment.
Options could include strengthening the bill’s clause 37, which requires regulators to report on specific issues, by adding clearer performance targets and more demanding cost-benefit analysis. There could also be more resources for the Treasury Select Committee to scrutinize regulators. The government could commit to a joint committee meeting occasionally — such as once a year — if it does not want to create additional permanent bodies, some of the people said.
Peers are pushing for some other changes too, including ensuring there is a parliamentary vote if authorities want to create a central bank digital currency.
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